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■ 

CLARK  J.  MILLIRON 


REGULATIONS  NO.  33 

U.  S.  INTERNAL  REVENUE 


LAW  AND  REGULATIONS  RELATIVE 
TO  THE  INCOME  TAX 


SECTION   2,  ACT  OF  OCTOBER  3,  19i3 


In8r33 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


LAW  AND  REGULATIONS 


RELATfVE  TO 


THE  TAX  ON  INCOME  OF  INDIVIDUALS, 
CORPORATIONS,  JOINT  STOCK  COM- 
PANIES, ASSOCIATIONS,  AND 
INSURANCE  COMPANIES 


IMPOSED  BY  SECTION  2 
ACT  OF  OCTOBER  3J913 


January  5,  1914 


WASHINGTON 

GOVEFINMENT  PRINTING  OFFICE 

I9I4 


Regulations  No.  33      :      :      :      :     :     United  States  Internal  Revenue 


LAW  AND  REGULATIONS 


RELATIVE  TO 


THE  TAX  ON  INCOME  OF  INDIVIDUALS, 
CORPORATIONS,  JOINT  STOCK  COM- 
PANIES, ASSOCIATIONS,  AND 
INSURANCE  COMPANIES 

IMPOSED  BY  SECTION  2 
ACT  OF  OCTOBER  3,  1913 


January  5,  1914 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1914 


s 

so 

Tv)  ^r-    33 


INCOME  TAX  LAW. 

[Section  2,  act  October  3,  1913.] 


A.  Subdivision  1.  That  there  shall  be  levied,  assessed,  j^^^^,™^^^_  *^^' 
collected  and  paid  annually  upon  the  entire  net  income 
arising  or  accruing  from  all  sources  in  the  preceding 
calendar  year  to  every  citizen  of  the  United  States, 
whether  residing  at  home  or  abroad,  and  to  every  per- 
son residing  in  the  United  States,  though  not  a  citizen 
thereof,  a  tax  of  1  per  centum  per  annum  upon  such 
income,  except  as  hereinafter  provided;  and  a  like 
tax  shall  be  assessed,  levied,  collected,  and  paid  annu- 
ally upon  the  entire  net  income  from  all  property  owned 
and  of  every  business,  trade,  or  profession  carried  on  in 
the  United  States  by  persons  residing  elsewhere. 


f    (_7) 


Subdivision  2.  In  addition  to  the  income  tax  provided    Additional  tax 

'^  on  net  incomes  in 

under  this  section  (herein  referred  to  as  the  normal  excess  of  $20,000. 
income  tax)  there  shall  be  levied,  assessed,  and  collected 
upon  the  net  income  of  every  individual  an  additional 
income  tax  (herein  referred  to  as  the  additional  tax)  of 
1  per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $20,000  and  does  not  exceed 
$50,000,  and  2  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $50,000  and  does 
not  exceed  $75,000,  3  per  centum  per  annum  upon  the 
amount  by  which  the  total  net  income  exceeds  $75,000 
and  does  not  exceed  $100,000,  4  per  centum  per  annum 
upon  the  amount  by  which  the  total  net  income  exceeds 
$100,000  and  does  not  exceed  $250,000,  5  per  centum 
per  annum  upon  the  amount  by  which  the  total  net 
income  exceeds  $250,000  and  does  not  exceed  $500,000, 
and  6  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $500,000.  All  the  pro- 
visions of  this  section  relating  to  individuals  who  are 
chargeable  with  the  normal  income  tax,  so  far  as  they 
are  applicable  and  are  not  inconsistent  with  this  sub- 
division of  paragraph  A,  shall  apply  to  the  levy,  assess- 
ment, and  collection  of  the  additional  tax  imposed  under 


4  INCOME    TAX    LAW. 

this  section.  Every  person  subject  to  this  additional 
tax  shall,  for  the  purpose  of  its  assessment  and  collection, 
of^iu^r/iKome"™"^'^^^  ^  personal  return  of  his  total  net  income  from  all 
be  made  a°nu-soiuces.  Corporate  or  otherwise,  for  the  preceding  cal- 
endar year,  under  rides  and  reticulations  to  be  prescribed 
by  the  Commissioner  of  Internal  Ilevenue  and  approved 


vevei] 


by  the  Secretary  of  the  Treasuryt^/For  the  purpose  of 
Interest       jnthis  additional  tax  the  taxable  income  of  any  individual 

pains  and  prolits  '' 

ofcorponitions  togliall  embracc  the  share  to  which  he  would  be  entitled 

be  jncliKlec). 

of  the  gains  and  profits,  if  divided  or  distributed,  whether 
divided  or  distributed  or  not,  of  all  corporations,  joint- 
stock  companies,  or  associations  however  created  or 
organized,  formed  or  fraudulently  availed  of  for  the 
pur])ose  of  ])reventing  the  imposition  i)f  such  tax  through 
the  medium  of  permitting  such  gains  and  profits  to 
accumulate  instead  of  being  divided  or  distributed;  and 
the  fact  that  any  such  corporation,  joint-stock  com- 
pany, or  association,  is  a  mere  holding  company,  or  that 
patis*^im"profUsthe  gains  and  profits  are  permitted  to  accumulate  beyond 
how°?eKardeT^^' ^1^6  reasonable  needs  of  the  business  shall  be  prima 
facie  evidence  of  a  fraudulent  purpose  to  escape  such 
tax;  but  the  fact  that  the  gains  and  profits  are  m  any 
case  permitted  to  accumulate  and  become  surplus  shall 
not  be  construed  as  evidence  of  a  purpose  to  escape  the 
said  tax  in  such  case  unless  the  Secretary  of  the  Treasury 
shall  certify  that  in  his  opinion  such  accumiUal-ion  is 
unreasonable  for  the  purposes  of  the  business;  '  When 
requested  by  the  Commissioner  of  Internal  Revenue,  or 
any  district  collector  of  internal  revenue,  such  corpora- 
tion, joint-stock  company,  or  association  shall  forward 
to  him  a  correct  statement  of  such  ])rofits  and  the  names 
of  the  individuals  who  would  be  entitled  to  the  same  if 
distributed. 


(s) 

B.  That,  s 


itenis  con'suuit-  ^-  That,  subjcct  Only  to  such  exemptions  and  deduc- 
ing same,  tioiis  as  are  hereinafter  allowed,  the  net  income  of  a 
taxable  person  shall  include  gains,  profits,  and  income 
derived  from  salaries,  wages,  or  compensation  for  per- 
sonal serAdce  of  whatever  kind  and  in  whatever  form 
paid,  or  from  pi'ofessions,  vocations,  businesses,  trade, 
commerce,  or  sales,  or  dealings  in  property,  whether  real 
or  personal,  growing  out  of  the  ownership  or  use  of  or 
interest  in  real  or  personal  property,  also  from  interest, 
rent,  dividends,  securities,  or  the  transaction  of  any  law- 
ful business  carried  on  for  gain  or  profit,  or  gains  or  profits 


INCOME    TAX    LAW.  O 

and  income  derived  from  any  source  whatever,  including 
the  income  from  but  not  the  vakie  pfproperty  acquired  q^^^'eT'^by  gfn, 
by  gift,  bequest,  devise,  or  dcscen&^r ovided,  That  the^t-^^-^^^^','!^  ^°; 
proceeds  of  hfe  insurance  policies  paid  upon  the  death  of  ^i^°^*^<^'  exempt. 
the  person  insured  or  payments  made  by  or  credited  to 
the  insured,  on  life  insurance,  endowment,  or  annuity 
contracts,  upon  the  return  thereof  to  the  insured  at  the 
maturity  of  the  term  mentioned  in  the  contract,  or  upon 
surrender  of  contract,  shall  not  be  included,  as  income. 


(7^, 


hat  in  computing  net  income  for  the  purpose  of  t  he  j^^educWons ^ai- 
normal  tax  there  shall  be  allowed  as  deductions:  First, P^u^^^^f^^ °et ^m- 
the  necessary  expenses  actually  paid  in  carrying  on  a^Jg^aftai.*^^  ^°^' 
business,   not /mcluding   personal,  liv^ing,   or  family  ex- 
penses; second,  all  interest  pdd  within  the  year  by  a  tax- 
able person  on  indebtednes^;7t/iird,  all  national.  State, 
coimty,  school,  and  municipal  taxes  paid  within  the  year, 
,       not    including    those    assessed    against    local    benefits; 
(/6j  fourth,   losses    actually  sustained    during   the    year,   in- 
curred in  trade  or  arising  from  fires,  storms,  or  shipwreck, 
and  not  compensated  for  by  insurance  or  otnerwise;^fth, 
debts  due   to   the   taxpayer  actually  ascertained   to  be  /y^  \ 
worthless    and    charged    off   within    the    yearj'^sixthTa^' 
reasonable  allowance  for  the  exhaustion,  wear  and  tear 
of  property  arising  out  of  its  use  or  employment  in  the 
business,  not  to  exceed,  in  the  case  of  mines,  5  per  centum 
of  the  gross  value  at  the  mine  of  the  output  for  the  year 
for  whicn  the  computation  is  made,  but  ]io  deduction 
shall  be  made  for  any  amount  of  expense  of  restoring 
property    or   making   good    the    exhaustion    thereof   for 
which  an  allowance  is  or  has  been  made :  Provided,  That 
no  deduction  shall  be  allowed  for  any  amount  paid  out 
for  new  buildings,  permanent  improvements,  or  better- 
ments/^made  to  increase  the  value  of  any  property  or 
estatJ/'^'iventh,  the  amount  received  as  dividends  upon 
the  stock  or  from  the  net  earnings  of  any  corporation, 
joint  stock  company,  association,  or  insurance  company 
which  i^  taxable  upon  its  net  income  as  hereinafter  pro- 
vided^ (Eighth,  the  amount  of  income,  the  tax  upon  which 
has  been  paid  or  withheld  for  payment  at  the  source  of 
the  income,  under  the  provisions  of  this  section,  provided 
that  whenever  the  tax  upon  the  income  of  a  person  is 
required  to  be  withheld  and  paid  at  the  source  as  here- 
inafter required,  if  such  annual  income  does  not  exceed 
the  sum  of  S3, 000  or  is  not  fixed  or  certain,  or  is  indefinite, 


O^k 


tcrest  ojuab.- 
ations  of 


6  INCOME    TAX    LAW. 

or  irregular  as  to  amount  or  time  of  accrual,  the  same  shall 
not  be  deducted  in  the  personal  return  of  such  person, 

//S) 

Net  income  or      rt^\  i   •  t  i         i  i  i        • 

nonresidents,  ihc  net  uicomc  irom  property  owne(i  and  busmess  car- 
o\TO'cd^in'?r^ted  lit'd  ou  in  the  United  States  by  persons  residing  elsewhere 
states.  shall  be  computed  upon  the  basis  prescribed  in  this  par- 

agraph and  that  part  of  paragraph  G  of  this  section 
relating  to  the  computation  of  the  net  income  of  corpora- 
tions, joint-stock  and  insurance  companies,  organized, 
created,  or  existing  under  the  laws  of  foreign  countries, 
in  so  far  as  applicable. 
Sto^~~^  That  in  computing  net  income  under  this  section  there 
states^  and  con?- shall  be  cxcludcd  the  interest  upon  the  obligations  of  a 
takru.'°s.  officers  St  ate  or  any  political  subdivision  thereof,  and  upon  the 
exempt  Irom  tax.  obligations  of  the  United  States  or  its  possessions;  also  the 
compensation  of  the  present  President  of  the  United 
States  during  the  term  for  which  he  has  been  elected,  and 
of  the  judges  of  the  supreme  and  inferior  courts  of  the 
United  States  now  in  office,  and  the  compensation  of  all 
officers  and  employees  of  a  State  or  any  pohtical  sub- 
division thereof  except  when  such  compensation  is  paid 
by  the  United  States  Government. 

I  /v) 

ssJoo^aVi'owed     C.^That  thcrc  shall  be  deducted  from  the  amount  of 
son^ndlf  oooad- ^^^^  ^^^  income  of  each  of  said  persons,  ascertained  as 
ricdmlliandw!fePro^^ed  herein,  the  sum  of  $3,000,  plus  $1,000  additional 
living  together,    jf  ^j^^  person  making  the  return  be  a  married  man  with  a 
wife  living  with  him,  or  plus  the  sum  of  $1,000  additional 
if  the  person  making  the  return  be  a  married  woman  with 
a  husband  living  with  her;  but  in  no  event  shall  this  addi- 
tional exemption  of  $1,000  be  deducted  by  both  a  husband 
and  a  wife:  Provided,  That  only  one  deduction  of  $4,000 
shall  be  made  from  the  aggregate  income  of  both  husband 
and  wife  when  living  together. 

wWcVtaxfstobe  ^-  The  Said  tax  shall  be  computcd  upon  the  remainder 
computed.  Q-f  gg^j^j  j^q^  incomc  of  each  person  subject  thereto,  accru- 

ing during  each  preceding  calendar  year  ending  Decem- 
ber thirty-first :  Provided,  however,  That  for  the  year  end- 
ing December  tliirty-first,  nineteen  hundred  and  thirteen, 
said  tax  shall  be  computed  on  the  net  income  accruing 
from  March  first  to  December  thirty-first,  nineteen  hun- 
dred and  thirteen,  both  dates  inclusive,  after  deducting 
five-sixths  only  of  the  specific  exemptions  and  deductions 


INCOME    TAX    LAW.  7 

herein  provided  for.     On  or  before  the  first  day  of  March,  jn^^fe'^jer^oath 
nineteen  hundred   and  fourteen,    and   the  first   day   of  by  .each  i^rson 

ilSVm^    £i    DcL    111" 

of  March  in  each  year  thereafter,  a  true  and  accurate  come  of  ja.ooo  or 

return,  under  oath  or  affirmation,  shall  be  made  by  each 

person  of  lawful   age,   except   as  hereinafter  provided, 

subject  to  the  tax  imposed  by  this  section,  and  having 

a  net  income  of  S3, 000  or  over  for  the  taxable  year,  to 

the  collector  of  internal  revenue  for  the  district  in  which 

such  person  resides  or  has  his  principal  place  of  business, 

or,  in  the  case  of  a  person  residing  in  a  foreign  country,  in 

the  place  where  his  principal  business  is  carried  on  within 

the  United  States,  in  such  form  as  the  Commissioner  of 

Internal  Revenue,  with  the  approval  of  the  Secretary  of 

the  Treasury,  shall  prescribe,  setting  forth  specifically 

the  gross  amount  of  income  from  all  separate  sources  and ,  Gross    income 

o  ■*■  irom  2Li.i   S0UXCG3 

from  the  total  thereof,  deducting  the  aggregate  items  or  to  be  specified. 
expenses   and  allowance  herein   authorized;    guardians,    Guardians, 
trustees,    executors,    administrators,    agents,    receivers,  make  retum' for 

,       , ,  .  .       persons  for  whom 

conservators,  and  all  persons,  corporations,  or  associa- they  act. 
tions  acting  in  any  fiduciary  capacity,  shall  make  and 
render  a  return  of  the  net  income  of  the  person  for  whom 
they  act,  subject  to  this  tax,  coming  into  their  custody  or 
control  and  management,  and  be  subject  to  all  the  pro- 
visions of  this  section  which  apply  to  individuals: 
Provided,  That  a  return  made  by  one  of  two  or  more  joint 
guardians,  trustees,  executors,  administrators,  agents, 
receivers,  and  conservators,  or  other  persons  acting  in  a 
fiduciary  capacity,  filed  in  the  district  where  such  person 
resides,  or  in  the  district  where  the  will  or  other  instru- 
ment under  which  he  acts  is  recorded,  under  such  regu- 
lations as  the  Secretary  of  the  Treasury  may  prescribe, 
shall  be  a  sufficient  compliance  with  the  requirements  of 
this  paragrapMr^^nd  also  all  persons,  firms,  companies,    Persons,  firms, 

^  ,.  .  ..  .  etc.,  having  con- 

copartnerships,   corporations,    ioint-stock   companies   or troi of  determina- 

^       .       .  "^  .  .  ,  ble  income  pay- 

associations,  and  insurance  companies,  except  as  here- able  to  others. 

inafter  provided,  in  whatever  capacity  acting,  having 

the  control,   receipt,   disposal,   or  payment  of  fixed  or 

determinable    annual    or   periodical   gains,    profits,    and 

income  of  another  person  subject  to  tax,  shall  in  behalf 

of  such  person  deduct  and  withhold  from  the  payment 

an  amount  equivalent  to  the  normal  income  tax  upon    Normal  tax  to 

/  ^         be  deducted  and 

the  same  and  make  and  render  a  return,  as  aforesaid,  return      thereof 
but  separate  and  distinct,  of  the  portion  of  the  income 
of  each  person  from  which  the  normal  tax  has  been  thus 
withheld,  and  containing  also  the  name  and  address  of 


8  INCOME    TAX    LAW. 

such  person  or  statiiiji;  that  the  name  and  address  or  the 
address,  as  the  case  may  be,  are  unknown:  Provided,  That 
the  provision  roquirin«jj  the  normal  tax  of  individuals  to 
be  withheld  at  the  source  of  the  income  shall  not  be  con- 
strued to  rocpiire  any  of  such  tax  to  be  withheld  prior  to 
the  first  day  of  November,  nineteen  hundred  and  thirteen: 
n^i^ca  n^s  In- F*^omded  further,  That  in  either  case  above  mentioned 
w!rm^'^''"''i>()  return jof  income  not  exceeding  $3,000  shall  be  re- 

m^^\'^\vo^flo^^^^^^^^^^^^^^^  ^^^^^^^^^  That  any  persons  carrying  on 
be   included    in  business  ill  partnership  shall  be  liable  for  income  tax 

return.  _  .... 

onl}^  in  their  individual  capacity,  and  the  share  of  the 

profits  of  a  partnership  to  which  any  taxable  partner 

would   be  entitled  if   the  same  were   divided,   whether 

divided  or  otherwise,  shall  be  returned  for  taxation  and 

the  tax  paid,  under  the  provisions  of  this  section,  and  any 

ranncrshipssuch  firm,  wheii  requested  by  the  Commissioner  of  Inter- 
must    submit       IT-.  T       •  11 
statements  when  11  a  1  Revenuc,  or  any  district  collector,  shall  forward  to 

required.  p  i  r-  i     i 

him  a  correct  statement  of  such  profits  and  the  names  of 
the  individuals  who  would  be  entitled  to  the  same,  if  dis- 
ivvhuiQiVr^rTlvided  further.  That  persons  liable  for  the 
normal  income  tax  only,  on  their  own  account  or  in 
behalf  of  another,  shall  not  be  required  to  make  return 
Dividends    on  of  the  iiicome  derived  from  dividends  on  the  capital  stock 

stock,  when  to  be  .  ,  .    .  , 

excluded     from  or  iroiii  the  net  earnings  oi  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies  taxable 
upon   their  net   income   as  hereinafter  provided.     Any 
person  for  whom  return  has  been  made  and  the  tax  paid, 
or  to  be  paid  as  aforesaid,  shall  not  be  required  to  make 
a  return  unless  such  person  has  other  net  income,  but 
only  one  deduction  of  $3,000  shall  be  made  in  the  case  of 
any  such  person.     The  collector  or  deputy  collector  shall 
Returns  to  be  require  every  list  to  be  verified  by  the  oath  or  affirmation 
ami^lmended^re^of  the  partyVendcring  ftl^f  the  collector  or  deputy  col- 
qu'^c.rbj  rouec- lector  have  reason  to  believe  that  the  amount  of  any 
^^'  income  returned  is  understated,  he  shall  give  due  notice 

to  the  person  making  the  return  to  show  cause  why  the 
amount  of  the  return  should  not  be  increased,  and  upon 
proof  of  the  amount  understated  may  increase  the  same 
Appeals    from  accordingly.     If  dissatisfied  with  the  decision  of  the  col- 

decisfon    of    eol-  ^  i        •         i  •    i         n       i 

lector.  lector,  such  person  may  submit  the  case,  with  all  the 

papers,  to  the  Commissioner  of  Internal  Revenue  for  his 
decision,  and  may  furnish  sworn  testimony  of  A\'itnesses 
to  Drove  any  relevant  facts. 


Assessments,      E.  That  all  assessments  shall  be  made  by  the  Commis- 
ments'of.  sioner  of  Internal  Revenue  and  all  persons  shall  be  notified 


INCOME    TAX    LAW.  9 

of  the  amount  for  which  they  are  respectively  liable  on  or 
before  the  first  day  of  June  of  each  successive  year,  and 
said  assessments  shall  be  paid  on  or  before  the  thirtieth 
day  of  June,  except  in  cases  of  refusal  or  neglect  to  make 
such  return  and  in  cases  of  false  or  fraudulent  returns,  in  to^ttae  when  a^'s- 
which  cases  the  Commissioner  of  Internal  Revenue  s^^^ll  p''af™w"ithmu  in- 
upon  the  discovery  thereof,  at  any  time  within  three  years  curring  penalty. 
after  said  return  is  due,  make  a  return  upon  information 
obtained  as  provided  for  in  this  section  or  by  existing  law, 
and  the  assessment  made  by  the  Commissioner  of  Internal 
Revenue  thereon  shall  be  paid  by  such  person  or  persons 
immediately  upon  notification  of  the  amount  of  such  as- 
sessment; and  to  any  sum  or  sums  due  and  unpaid  after 
the  thirtieth  day  of  June  in  any  year,  and  for  ten  days    Penalty  and  in- 

ter6st  in  ca,s9  of 

after  notice  and  demand  thereof  by  the  collector,  there  nonpayment 

,  within    10    flavs 

sliaU  be  added  tiie  sum  oi  5  per  centum  on  the  amount  oi  after  June  30th. 
tax  unpaid,  and  interest  at  the  rate  of  1  per  centum  per 
month  upon  said  tax  from  the  time  the  same  became  due, 
except  from  the  estates  of  insane,  deceased,  or  insolvent 
persons.       ^ 

.yi  persons,  firms,  copartnerships,  companies,  corpora-  etc  ,^"°ithhoSg 
tions,  jomt-stock  companies  or  associations,  and  insurance  ^0™^!^^!^^^.°" '^«- 
companies,  in  whatever  capacity  acting,  including  lessees 
or  mortgagors  of  real  or  personal  property,  trustees  acting 
in  any  trust  capacity,  executors,  administrators,  agents, 
receivers,  conservators,  employers,  and  all  officers  and  em- 
ployees of  the  United  States  having  the  control,  receipt, 
custody,  disposal,  or  payment  of  mterest,  rent,  salaries, 
wages,  premiums,  annuities,  compensation,  remuneration, 
emoluments,  or  other  fixed  or  determinable  annual  gains, 
profits,  and  mcome  of  another  person,  exceeding  $3,000 
for  any  taxable  year,  other  than  dividends  on  capital 
stock,  or  from  the  net  earnings  of  corporations  and  jomt- 
stock  companies  or  associations  subject  to  like  tax,  who 
are  required  to  make  and  render  a  return  in  behalf  of 
another,  as  provided  herein,  to  the  collector  of  his,  her,  or    Return  to  be 

, .         .  ,  1  1-1  1  '        ^   ±       ^     ^        .  made  to  collector 

its  district,  are  hereby  authorized  and  required  to  deduct  of  district, 
and  withhold  from  such  annual  gains,  profits,  and  income 
such  sum  as  will  be  sufficient  to  pay  the  normal  tax  im- 
posed thereon  by  this  section,  and  shall  pay  to  the  officer  ^^T^ax^to  ^e^^aid 
of  the  United  States  Government  authorized  to  receive  j.^„«d^  to    receive 
the  same;  aiid  ^e^  are  each  hereby  made  personally  liable 
for  such  taxS^n  all  cases  where  the  income  tax  of  a 
person  is  withheld  and  deducted  and  paid  or  to  be  paid  at 


same. 


10  INCOME    TAX    LAW. 

the  source,  as  aforesaid,  such  person  shall  not  receive  the 
benefit  of  the  deduction  and  exemption  allowed  in  para- 
fiied'^in'Idfan^  g^aph  C  of  this  scctiou  cxccpt  by  an  application  for  refund 
empuin"*  ^under  ^^  the  tax  uiiless  he  shall,  not  less  than  thirty  days  prior  to 
paragraph  c.       ^]^p  ^\^^j  ^^i  wliicli  the  return  of  his  income  is  due,  file  with 
the  person  who  is  required  to  withhold  and  pay  tax  for 
him,  a  signed  notice  in  writing  claiming  the  benefit  of  such 
exemption  and  thereupon  no  tax  shall  be  withheld  upon 
Penalty  for  fli- thc  amount  of  such  exemption:  Provided,  That  if  any  per- 
son for  the  purpose  of  obtaining  any  allowance  or  reduc- 
tion by  virtue  of  a  claim  for  such  exemption,  either  for 
himself  or  for  any  other  person,  knowingly  makes  any 
false  statement  or  false  or  fraudulent  representation,  he 
shall  be  liable  to  a  penalty  of  SSOO^nor  shall  any  person 
under  the  foregoing  conditions  be  allowed  the  benefit  of 
Notice  must  be  any  deduction  provided  for  in  subsection  B  of  this  section 

filed  in  advance        iiiii.i  i  ^  •  -i 

for  claim  for  de-  uiiless  he  Shall,  not  Icss  than  thirty  days  prior  to  the  day 

duction    under  i-ii  ,  i-i--  -i-i  m  -i 

paragraph  B.  ou  whicli  the  rcturii  01  his  income  is  due,  either  file  with 
the  person  who  is  required  to  withhold  and  pay  tax  for 
him  a  true  and  correct  return  of  his  annual  gains,  profits, 
and  income  from  all  other  sources,  and  also  the  deductions 
asked  for,  and  the  showing  thus  made  shall  then  become  a 
part  of  the  return  to  be  made  in  his  behalf  by  the  person 
required  to  withhold  and  pay  the  tax,  or  likewise  make 
application  for  deductions  to  the  collector  of  th^^strict 
Keturns,     for  in  wliich  rctum  Is  made  or  to  be  made  for  hir^Provided 

mmors,      msane  .  . 

persons,  etc.,  by  further,  That  if  such  person  is  a  minor  or  an  msane  person, 

whom  made.        ^  '  r         ^  ^  r  > 

or  is  absent  from  the  United  States,  or  is  unable  owing  to 
serious  illness  to  make  the  return  and  application  above 
provided  for,  the  return  and  application  may  be  made  for 
him  or  her  by  the  person  required  to  withhold  and  pay 
the  tax,  he  making  oath  under  the  penalties  of  this  Act 
that  he  has  sufficient  knowledge  of  the  affairs  and  prop- 
erty of  his  beneficiary  to  enable  him  to  make  a  full  and 
complete  return  for  him  or  her,  and  that  the  retjirn^nd  » 

application  made  by  him  are  full  and  complete  /Provide^t^j// 
be^dldJfct^^and/^'^^^^'''  That  the  amount  of  the  normal  tax  hereinbefore 
^,iii' I'Al^A^l  imposed  shall  be  deducted  and  withheld  from  fixed  and 

SOUiC  6    01    111001x16  l- 

ofrorporatiom'''  determinable  annual  gains,  profits,  and  income  derived 
from  interest  upon  bonds  and  mortgages,  or  deeds  of  trust 
or  other  similar  obligations  of  corporations,  joint-stock 
companies  or  associations,  and  insurance  companies, 
whether  payable  annually  or  at  shorter  or  longer  periods, 
although  such  interest  does  not  amount  to  S3, 000,  subject 
to  the  provisions  of  this  section  requiring  the  tax  to  be 


(3^ 


INCOME    TAX    LAW.  11 

withheld  at  the  source  and  deducted  from  annual  income 
and  paid  to  the  Government;  and  likewise  the  amount  of 
such  tax  shall  be  deducted  and  withheld  from  coupons, 
checks,  or  bills  of  exchange  for  or  in  payment  of  interest    Dividends    on 

.  "  .  ij>'  stocks,  or  interest 

upon  bonds  of  foreign  countries  and  upon  foreign  mort- on  foreign  bonds, 

,..  ,.  .  mortgages,  etc. 

gages  or  like  obligations  (not  payable  in  the  United  States), 
and  also  from  coupons,  checks,  or  bills  of  exchange  for  or 
in  payment  of  any  dividends  upon  the  stock  or  interest 
upon  the  obligations  of  foreign  corporations,  associations, 
and  insurance  companies  engaged  in  business  in  foreign 
countries;  and  the  tax  in  each  case  shall  be  withheld  and 
deducted  for  and  in  behalf  of  any  person  subject  to  the  tax 
hereinbefore  imposed,  although  such  interest,  dividends, 
or  other  compensation  does  not  exceed  $3,000,  by  any 
banker  or  person  who  shall  sell  or  otherwise  realize  cou- 
pons, checks,  or  bills  of  exchange  drawn  or  made  in  pay- 
ment of  any  such  interest  or  dividends  (not  payable  in  the 
United  States),  and  any  person  who  shall  obtain  payment 
(not  in  the  United  States),  in  behalf  of  another  of  such 
dividends  and  interest  by  means  of  coupons,  checks,  or 
bills  of  exchange,  and  also  any  dealer  in  such  coupons 
who  shall  purchase  the  same  for  any  such  dividends  or 
mterest  (not  payable  in  the  United  States),  otherwise  than 
from  a  banker  or  another  dealer  in  such  coupons;  but  in 
each  case  the  benefit  of  the  exemption  and  the  deduction 
allowable  under  this  section  may  be  had  by  complying 
with  the  foregoing  provisions  of  tliis  paragraph. 
i/J  All  persons,  firms,  or  corporations  undertaking  as  aobtaiQed^by°per- 
matter  of  business  or  for  profit  the  collection  of  foreign  |aged 'in  business 
payments  of  such  interest  or  dividends  by  means  of  cou- eig^°p^^|ts°of 
pons,  checks,  or  bills  of  exchange  shall  obtain  a  license '°*^'"^^*'®'''^' 
from  the  Commissioner  of  Internal  Revenue,  and  shall 
be  subject  to  such  regulations  enabhng  the  Government 
to  ascertain  and  verify  the  due  withholding  and  pay- 
ment of  the  income  tax  required  to  be  \vithheld  and  paid 
as  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  shall  prescribe; 
and  any  person  who  shall  knowingly  undertake  to  coUect  ^^^.P^naity  for  ^ii- 
such  payments  as  aforesaid  without  having  obtained  a^^ense. 
license  therefor,  or  without  complying  with  such  regula- 
tions, shall  be  deemed  guilty  of  a  misdemeanor  and  for 
each  offense  be  fined  in  a  sum  not  exceeding  $5,000,  or 
imprisoned  for  a  term  not  exceeding  one  year,  or  both, 
in  the  discretion  of  the  court. 


12  ^1  INCOME    TAX    LAW. 


(<s;) 


i.iabiiityfortax      Xotliiiij'  ill.  tliis  scctioii  shall  bc  construed  to  release  a 

not    allected    by  ts 

any  contract  p"- taxable  Dcrsoii  fi'om  liability  for  income  tax,  nor  shall  any 

tcred    nito    after  -r  ^       ^  '  "^ 

passage  of  act.     contract  entered  into  after  this  Act  takes  effect  be  valid 
in  regard  to  any  Federal  income  tax  imposed  upon  a  per- 
^        son  liable  to  such  ])ayment. 

/<.^c5Iy  TJic   tax   lierein   imposetl   upon   annual  gains,   profits, 
and  income  not  falling  under  the  foregoing  and  not  re- 
turned and  ])aid  l)y  virtue  of  the  for<'going  sliaU  be  assessed 
by  personal  return  under  rules  \\\\(\  regulations  to  be  pre- 
scribed by  the  Commissioner  of  Internal  Revenue  and 
/     approved  ])y  the  Secretar}^  of  the  Treasury. 
^^■,rf^^*^^^^^y^\\*i  provisions  of  this  section  relating  to  the  deduction 
normal  tax  only.  ^^^^  payment  of  the  tax  at  the  source  of  income  shall  only 
ap]:)ly  to  the  normal  tax  hereinbefore  imposed  upon  indi- 
viduals. 


rcna^it^y  ^^^^^-^     F.  That  if  any  person,  corporation,  joint-stock  com- 
mavc  required  re- p.^j^y    association,  or  insurance  comiiany  hable  to  make 

turn  or  for  raak- 1         J  '  '  . 

ing  false  return,  ^ho  rctum  or  pay  the  tax  aforesaid  shall  refuse  or  neglect 
to  make  a  return  at  the  time  or  times  hereinbefore  speci- 
fied in  each  year,  such  person  shall  be  liable  to  a  penalty 
of  not  less  than  $20  nor  more  than  $1,000.  Any  person 
or  any  officer  of  any  corporation  required  by  law  to  make, 

renalty     for  -^       .  -a  ^  i  i  j?   i 

making  false  or  render,  Sign,  or  verily  any  return  who  makes  any  false  or 

fraudulentreturn  i    i  ,        - ,^     •     ,       ,     ,        ^    s^      , 

fraudulent  return  or  statement  with  intent  to  deieat  or 
evade  the  assessment  required  by  this  section  to  be  made 
shall  be  guilty  of  a  misdemeanor,  and  shall  be  fined  not 
exceeding  $2,000  or  be  imprisoned  not  exceeding  one 
year,  or  both,  at  the  discretion  of  the  court,  with  the  costs 
of  prosecution. 

be^assessed^^nd      (?.   (a)  That    the    normal    tax    hereinbefore    imposed 
Set*^income"ofiipon  individuals  likewise  shall  be  levied,  assessed,  and 
joint' stock  com- paid   annuallv   upon   the   entire   net   income    arising  or 
c^'tions^"'^  '^*^°' accruing  from  all  sources  during  the  preceding  calendar 
year  to  every  corporation,  joint-stock  company  or  asso- 
ciation, and  every  insurance  company,  organized  in  the 
United  States,  no  matter  how  created  or  organized,  not 
including  partnerships;  but  if  organized,  authorized,  or 
existing  under  the  laws   of   any  foreign  country,   then 
upon  the  amount  of  net  income  accruing  from  business 
transacted  and  capital  invested  within  the  United  States 
durmg  such  ye^r^^irrrovided,   Jiowever,   That  nothmg  in 
piy^c°r\ain*or'-this  scctioii  shall  api)ly  to  labor,  agricultural,  or  horti- 
1^!^^^'°°^^^^"" cultural  organizations,  or  to  mutual  savings  banks  not 
having  a  capital  stock  represented  by  shares,  or  to  fra- 


INCOME    TAX    LAW.  13 

ternal  beneficiary  societies,  orders,  or  associations  oper- 
ating under  the  lodge  system  or  for  the  exclusive  benefit 
of  the  members  of  a  fraternity  itself  operating  under 
the  lodge  system,  and  providing  for  the  payment  of  life, 
sick,  accident,  and  other  benefits  to  the  members  of 
such  societies,  ordere,  or  associations  and  dependents  of 
such  members,  nor  to  domestic  building  and  loan  asso- 
ciations, nor  to  cemetery  companies,  organized  and  oper- 
ated exclusively  for  the  mutual  benefit  of  their  members, 
nor  to  any  corporation  or  association  organized  and 
operated  exclusively  for  religious,  charitable,  scientific, 
or  educational  purposes,  no  part  of  the  net  income  of 
which  inures  to  the  benefit  of  any  private  stockholder 
or  indi^ddual,  nor  to  business  leagues,  nor  to  chambers 
of  commerce  or  boards  of  trade,  not  organized  for  profit 
or  no  part  of  the  net  income  of  which  inures  to  the  benefit 
of  the  private  stockholder  or  individual;  nor  to  any 
civic  league  or  organization  not  organized  for  profit, 
but  operated  exclusively  for  the  promotion  of  social 
welfare:  Provided  fuHlur,  That  there  shall  not  be  taxed 
under  this  section  any  mcome  derived  from  any  public  income  derived 
utility  or  from  the  exercise  of  any  essential  governmental  ^ef  or^^govem- 
f unction  accruing  to  any  State,  Territory,  or  the  District  ^cc^Ai /Ifg^'To 
of  Columbia,  or  any  political  subdivision  of  a  State,  Ter-^esfetc.  '^^""'^°' 
ritory,  or  the  District  of  Columbia,  nor  any  income  accru- 
ing to  the  government  of  the  Philippine  Islands  or  Porto 
Rico,  or  of  an}''  political  subdivision  of  the  Philippine 
Islands  or  Porto  Rico:  Provided,  That  whenever  any 
State,  Territory,  or  the  District  of  Columbia,  or  any 
political  subdivision  of  a  State  or  Territory,  has,  prior  to 
the  passage  of  this  Act,  entered  in  good  faith  into  a  con- 
tract with  any  person  or  corporation,  the  object  and 
purpose  of  which  is  to  acquire,  construct,  operate  or 
mamtain  a  public  utility,  no  tax  shall  be  levied  under 
the  provisions  of  this  Act  upon  the  income  derived  from 
the  operation  of  such  public  utility,  so  far  as  the  pay- 
ment thereof  will  impose  a  loss  or  burden  upon  such 
State,  Territory,  or  the  District  of  Columbia,  or  a  politi- 
cal subdivision  of  a  State  or  Territory;  but  this  provi- 
sion is  not  intended  to  confer  upon  such  person  or  cor- 
poration any  financial  gain  or  exemption  or  to  relieve  Exemptions 
such  person  or  corporation  from  the  payment  of  a  tax  gains  or  profits 

■  ^     ^    P        •       jt  ■  ,.  .1  .  ,•        derived  from  con- 

as  provided  tor  m  this  section  upon  the  part  or  portion  tracts  by  persons 

.   ji  .  ,    .  J  1  •    1  1  ,•        or  corporations. 

CI  the  said  income  to  which  such  person  or  corporation 
shall  be  entitled  under  such  contract. 


14  INCOME    TAX    LAW. 

Net  income  of      (\)\  Siu'li  iiot  iiicomo  sliall  be  ascertained  bv  deducting: 

corporiitions,        ^^  _  •  f' 

joint-stock   com-  ff^m  the  CToss  aiiiouiit  of  tlie  income  of  such  corporation, 

panies,  etc.,  now  *^  ... 

ascortiiined.  joint-stock  company  or  association,  or  insurance  com- 
pany, received  within  the  year  from  all  sources,  (first) 
all  the  ordinary'  and  necessary  expenses  paid  within  the 
year  in  the  maintenance  and  operation  of  its  business 
and  j)roperties,  including  rentals  or  other  payments  re- 
quired to  be  made  as  a  condition  to  the  continued  use  or 
possession  of  property;  (second)  all  losses  actually  sus- 
taintnl  within  the  year  and  not  compensated  by  insurance 

pred^ns"*^  ^^  ^^^  other\\ase,  including  a  reasonable  allowance  for  depre- 
ciation by  use,  wear  and  tear  of  property,  if  any;  and 
in  the  case  of  mines  a  reasonable  allowance  for  depletion 
of  ores  and  all  other  natural  deposits,  not  to  exceed  5 
per  centum  of  the  gross  value  at  the  mine  of  the  output 
for  the  year  for  which  the  computation  is  made;  and  in 
case  of  insurance  companies  the  net  addition,  if  any, 
required  by  law  to  be  made  within  the  year  to  reserve 
funds  and  the  sums  other  than  dividends  paid  within  the 

sunmce^  TOmpa- y^^^  on  poHcy  and  annuity  contracts:  Provided,  That 

'"^^  mutual  fire  insurance  companies  requiring  their  members 

to  make  premium  deposits  to  provide  for  losses  and  ex- 
penses shall  not  return  as  income  any  portion  of  the 
premium  deposits  returned  to  their  policyholders,  but 
shall  return  as  taxable  income  all  income  received  by 
them  from  all  other  sources  plus  such  portions  of  the 
premium  deposits  as  are  retained  by  the  companies  for 
purposes  other  than  the  payment  of  losses  and  expenses 

•„?^^*i!^l i°™i?^° and  reinsurance  reserves:  Provided  furtlier,  That  mutual 

insurance  compa-  J  ' 

^^-  marine  insurance  companies  shall  include  in  their  return 

of  gross  income  gross  premiums  collected  and  received  by 
them  less  amounts  paid  for  reinsurance,  but  shall  be 
entitled  to  include  in  deductions  from  gi'oss  income 
amounts  repaid  to  policyholders  on  account  of  premiums 
pre^dously  paid  by  them  and  interest  paid  upon  such 
amounts  between  the  ascertainment  thereof  and  the  pay- 
Life  insurance  ment    thereof   and   life   insurance    companies   shall   not 

companies.  •       i     j  •  •  i  j  •  r  ,       i 

mclude  as  income  m  any  year  such  portion  or  any  actual 

premium  received  from  any  individual  policyholder  as 

shall  have  been  paid  back  or  credited  to  such  individual 

policyholder,  or  treated  as  an  abatement  of  premium  of 

int^?Jt^ awnS ^^^^  individual  policyholder,  within  such  year;  (third) 

th^  yea?  o*"^^^  ^^^  amount  of  interest  accrued  and  paid  within  the  year 

be*?[edSctedfn)m^'^  ^^^  indebtedness  to  an  amount  of  such  indebtedness 

not  exceeding  one-half  of  the  sum  of  its  interest  bearing 


income. 


INCOME    TAX    LAW.  15 

indebtedness  and  its  paid-up  capital  stock  outstanding 
at  tlie  close  of  the  year,  or  if  no  capital  stock,  the  amount 
of  interest  paid  \vithin  the  year  on  an  amount  of  its 
indebtedness  not  exceeding  the  amount  of  capital  em- 
ployed in  the  business  at  the  close  of  the  year:  Provided, 
That  in  case  of  indebtedness  wholly  secured  by  collateral 
the  subject  of  sale  in  ordinary  business  of  such  corpora- 
tion, joint-stock  company,  or  association,  the  total  inter- 
est secured  and  paid  by  such  company,  corporation,  or 
association  within  the  year  on  any  such  indebtedness  may 
be  deducted  as  a  part  of  its  expense  of  doing  business: 
Provided  further,  That  in  the  case  of  bonds  or  other  in-  wnr^^'guSy 
debtedness,  which  have  been  issued  with  a  guaranty  thatK^*?rTmtax- 
the  interest  payable  thereon  shall  be  free  from  taxation,  ^*'''"- 
no  deduction  for  the  payment  of  the  tax  herein  imposed 
shall  be  allowed;  and  in  the  case  of  a  bank,   banking 
association,  loan,  or  trust  company,  interest  paid  within  pj^t'g^'^a^/b'l  de" 
the  year  on  deposits  or  on  moneys  received  for  invest- fnTomt!™™^"*'' 
ment  and  secured  by  interest-bearing  certificates  of  in- 
debtedness issued  by  such  bank,  banking  association,  loan 
or  trust  company;   (fourth)  all  sums  paid  by  it  within  the 
year  for  taxes  imposed  under  the  authority  of  the  United    '^^^^^^^^. 
States  or  of  any  State  or  Territory  thereof,  or  imposed  by 
the  Government  of  any  foreign  country:  Provided,  ThatraSSI!^etc'!°'m- 
in  the  case  of  a  corporation,  joint-stock  company  or  asso-n°eS^  ^''"iTnited 
ciation,  or  insurance  company,  organized,  authorized,  or      ®^' 
existing  under  the  laws  of  any  foreign  country,  such  net 
income  shall  be  ascertained  by  deducting  from  the  gi-oss 
amount   of   its   income    accrued   within   the   year   from 
business    transacted    and    capital    invested    within    the 
United  States,  (first)  all  the  ordinary  and  necessary  ex- pg^rcunary^^^ ex- 
penses actually  paid  within  the  year  out  of  earnings  in®**- 
the  maintenance  and  operation  of  its  business  and  prop- 
erty within  the  United  States,  including  rentals  or  other 
payments  required  to  be   made   as  a   condition  to   the 
continued   use    or   possession   of   property;   (second)    all pr^^t^n^"*^  ^^' 
losses  actuallj-  sustained  within  the  year  in  business  con- 
ducted by  it  within  the  United  States  and  not  compen- 
sated by  insurance  or  otherwise,  including  a  reasonable 
allowance  for  depreciation  by  use,  wear  and  tear  of  prop- 
erty, if  any,  and  in  the  case  of  mines  a  reasonable  allow- 
ance for  depletion  of  ores  and  all  other  natural  deposits, 
not  to  exceed  5  per  centum  of  the  gross  value  at  the  mine 
of  the  output  for  the  year  for  which  the  computation  is 


16  INCOME    TAX    LAW. 

Rescue  fimds ,,^,jjj,. •    .,,ni  ;,,  ^.ji^c  of  iiisurancc  companies  the  net  addi- 

of  instirance  com-  '  ■••  _       _ 

i''"''««  tioii.  if  any,  required  by  law  to  be  made  within  the  year 

t(t  reserve  funds  and  the  sums  other  than  divicUMuls  paid 
within  tlie  year  on  poHcy  and  annuity  contracts:  Provided 

\uium\  rire  in- further,  'Iliat  mutual  lire  insurance  companies  requiring 
their  members  to  mak(>  prenuum  deposits  to  provide  tor 
losses  and  expenses  shall  not  return  as  income  any  por- 
tion of  the  premium  (k>2)osits  returned  to  their  policy- 
holdere,  but  shall  return  as  taxable  income  all  income 
received  by  them  from  all  other  sources  plus  such  por- 
tions of  the  premium  deposits  as  are  retained  by  the 
companies  for  purposes  other  than  the  payment  of  losses 
and  (expenses  and  reinsurance  reserves:  Provided  further, 

Mutual  marmeTliat  inutual  marine  insurance  companies  shall  include  in 

iiistiranoe.  .  „  .  . 

llieir  return  oi  gi'oss  income  gross  premiums  collected  and 
received  by  them  less  amounts  paid  for  reinsurance,  but 
shall  be  entitled  to  include  in  deductions  from  gross 
income  amounts  repaid  to  poli(;yholders  on  account  of 
premiums  p^e^^ously  paid  by  them,  and  interest  paid 
upon  such  amounts  between  the  ascertainment  thereof 
and  the  payment  thereof  and  life  insurance  companies 
shall  not  include  as  income  in  any  jenr  such  portion  of 
any  actual  premium  received  from  any  individual  policy- 
holder as  shall  have  been  paid  back  or  credited  to  such 
individual  jjolicyholder,  or  treated  as  an  abatement  of 
premium  of  such  individual  policyholder,  within  such 
inj°ndt*aid^™-year;  (third)  the  amount  of  interest  accrued  and  paid 
indebtedDe^^  ^"^  within  the  year  on  its  indebtedness  to  an  amount  of  such 
indebtedness  not  exceeding  the  proportion  of  one-half  of 
the  sum  of  its  interest  bearing  indebtedness  and  its 
paid-up  capital  stock  outstanding  at  the  close  of  the 
year,  or  if  no  capital  stock,  the  caj^ital  employed  in  the 
business  at  the  close  of  the  year  which  the  gross  amount 
of  its  income  for  the  year  from  business  transacted  and 
capital  invested  within  the  United  States  bears  to  the 
gi'oss  amount  of  its  income  derived  from  all  sources  within 
and  without  the  United  States:  Provided,  That  in  the  case 
Bonds    whose  of  bonds  or  other  indebtedness  which  have  been  issued 

insKors     h  3  V  6 

agreed    to   pay  with  a  guaranty  that  the  interest  payable  thereon  shall  be 

tax  deduction,     free  from  taxation,  no  deduction  for  the  paj^ment  of  the 

tax  herein  imposed  shall  be  allowed;    (fourth)  all  sums 

Taxes.  P^'''^^  ^J  ^^  within  the  year  for  taxes  imposed  under  the 

authority  of  the  United  States  or  of  any  State  or  Territory 

thereof  or  the  District  of  Columbia.     In  the  case  of  assess- 


INCOME    TAX    LAW.  17 

ment  insurance  companies,  whether  domestic  or  foreign, 

the   actual   deposit   of   sums   with   State   or   Territorial 

officers,  pursuant  to  law,  as  additions  to  guarantee  or 

reserve  funds  shall  be  treated  as  being  payments  required  se?^rtodb%    ^''' 

by  law  to  reserve  funds. 

(c)  The  tax  herein  imposed  shall  be  computed  upon  its  ^J^l^  on^ne*t°S- 
entire  net  income  accrued  within  each  preceding  calendar ^"^^^j^^'^^'^'^s 
year    ending    December    thirty-first:  Provided,    liowever,'^^^^- 
That  for  the  year  ending  December  thirty-first,  nineteen 
hmidred  and  thirteen,  said  tax  shall  be  imposed  upon 
its  entire  net  income  accrued  within  that  portion  of  said 
year  from  March  first  to  December  thirty-first,  both  dates 
inclusive,  to  be  ascertained  by  taking  five-sixths  of  its 
entire  net  income  for  said  calendar  year:  Provided  further,    But  fiscal  year 

•^  ■  .      .  other  tftan  calen- 

That  any  corporation,  joint-stock  company  or  association,  dar  may  bedesjg- 
or  insurance  company  subject  to  this  tax  may  designate  rations, 
the  last  day  of  any  month  in  the  year  as  the  day  of  the 
closing  of  its  fiscal  year  and  shall  be  entitled  to  have  the 
tax  paj'able  by  it  computed  upon  the  basis  of  the  net 
income  ascertained  as  herein  provided  for  the  year  ending 
on  the  day  so  designated  in  the  year  preceding  the  date  of 
assessment  instead  of  upon  the  basis  of  the  net  income  for 
the  calendar  year  preceding  the  date  of  assessment ;  and  it 
shall  give  notice  of  the  day  it  has  thus  designated  as  the 
closing  of  its  fiscal  year  to  the  collector  of  the  district  in 
which  its  principal  business  office  is  located  at  any  time 
not  less  than  thirty  days  prior  to  the  date  upon  which  its 
annual  return  shall  be  filed.  All  corporations,  joint-stock  to  be  rSdered  ™ 
companies  or  associations,  and  insurance  companies  sub- 
ject to  the  tax  herein  imposed,  computing  taxes  upon  the 
income  of  the  calendar  year,  shall,  on  or  before  the  first 
day  of  March,  nineteen  hundred  and  fourteen,  and  the  first 
day  of  March  in  each  year  thereafter,  and  all  corpora- 
tions, joint-stock  companies  or  associations,  and  insurance 
companies,  computing  taxes  upon  the  income  of  a  fiscal 
year  which  it  may  designate  in  the  manner  hereinbefore 
provided,  shall  render  a  hke  return  within  sixty  d  ays  ^^g^^f^^s^^^l^ 
after  the  close  of  its  said  fiscal  year,  and  within  sixty  days  ^^^^^  cdiSto?'^o1 
after  the  close  of  its  fiscal  year  in  each  year  thereafter,  or  district. 
in  the  case  of  a  corporation,  joint-stock  company  or  asso- 
ciation, or  insurance  company,  organized  or  existing  under 
the  laws  of  a  foreign  country,  in  the  place  where  its  princi- 
pal business  is  located  within  the  United  States,  in  such 
form  as  the  Commissioner  of  Internal  Revenue,  with  the 
24785°— 14 2 


18  INCOME    TAX    LAW. 

approval  of  tho  Secretary  of  llio  Treasury,  shall  prescribe, 
shall  render  a  true  and  accurate  return  under  oath  or 
alUrmation  of  its  president,  vice  president,  or  other  princi- 
pal officer,  and  its  treasurer  or  assistant  treasui'er,  to  the 
Information  to  collector  of  internal  revenue  for  the  district  in  which  it 

bo    included    in  _  _ 

retiirn  of  corpo-l^as  itg  principal  place  of  business,  setting  forth   {first) 
Paid-upcapitai.  the  total  amount  of  its  paid-up  capital  stock  outstanding, 
or  if  no  capital  stock,  its  capital  employed  in  business,  at 
the  close  of  the  year;   {second)  the  total  amount  of  its 
ed^^^®*^^**^*"^' bonded  and  other  indebtedness  at  the  close  of  the  year; 
{third)  the  gross  amount  of  its  income,  received  during 
such  year  from  all  sources,  and  if  organized  under  the  laws 
Gross  income.  ^£  ^  foreign  couutry  the  gross  amomit  of  its  income  re- 
ceived within  the  year  from  business  transacted  and  capi- 
tal invested  within  the  United  States;  {fourth)  the  total 
Ordinary  amount  of  all  its  ordiiiarv  and  necessary  expenses  paid  out 

expenses  of  opo-  _  _  "  ^         i  i  ^ 

ration  and  main- gf  earnings  ill  the  maintenance  and  operation  of  the  busi- 

tenance.  *  .  ... 

ness  and  properties  of  sucli  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  within  the 
Kentai.etc.      year,  stating  separately  all  rentals  or  other  payments 
required  to  be  made  as  a  condition  to  the  continued  use 
or  possession  of  property,  and  if  organized  under  the  laws 
of  a  foreign  country  the  amount  so  paid  in  the  mainte- 
nance and  operation  of  its  business  within  the  United 
pr^Sn^^  "^^ States;  {fifth)  the  total  amount  of  all  losses  actually  sus- 
tained during  the  year  and  not  compensated  by  insurance 
or  otherwise,  stating  separately  any  amounts  allowed  for 
depreciation  of  property,  and  in  case  of  insurance  com- 
panies the  net  addition,  if  any,  required  by  law  to  be 
servo  f{S)    '^made  within  the  year  to  reserve  funds  and  the  sums  other 
than  dividends  paid  within  the  year  on  policy  and  annuity 
contracts:  Provided  further,  That  mutual  fire  insurance 
companies  requiring  their  members  to  make  premium 
deposits  to  provide  for  losses  and  expenses  shall  not  re- 
mhrm^"^deposite  ^^''^  ^^  iucomc  any  portion  of  the  premium  deposits  re- 
"nrned^aa  ?axab^  ^^^^'i  ^°  ^^^■"'  policyholders,  but  shall  return  as  taxable 
income.  incomc  all  income  received  by  them  from  all  other  sources 

plus  such  portions  of  the  premium  deposits  as  are  retained 
Premiums  r  in  ^^  ^^^  Companies  for  purposes  other  than  the  payment  of 
surance,etc.'  losscs  and  expcnscs  and  reinsurance  reserves:  Provided 
further,  That  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gross  income  gross  premiums 
collected  and  received  by  them  less  amounts  paid  for  re- 
insurance, but  shall  be  entitled  to  include  in  deductions 
from  gross  income  amounts  repaid  to  poUcyholders  on 


INCOME    TAX   LAW.  19 

account  of  premiums  previously  paid  by  them,  and  in- 
terest paid  upon  such  amounts  between  the  ascertain- 
ment thereof  and  the  payment  thereof  and  Ufe  insurance 
companies  shall  not  include  as  income  in  any  year  such 
portion  of  any  actual  premium  received  from  any  in- 
dividual policyholder  as  shall  have  been  paid  back  or 
credited  to  such  individual  policyholder,  or  treated  as  an 
abatement  of  premium  of  such  individual  policyholder, 
within  such  year;  and  in  case  of  a  corporation,  joint-    Foreign  corpo- 

,1  •     ,  •  •  rations  doing  bus- 

stock  company  or  association,   or  insurance  company,  ness  in  the  united 
organized  under  the  laws  of  a  foreign  country,  all  losses 
actually  sustained  by  it  during  the  year  in  business  con- 
ducted by  it  within  the  United  States,  not  compensated 
by  insurance  or  otherwise,  stating  separately  any  amounts 

n  ici  •    1  •  p  J  !•  (••  Reserve  fund. 

allowed  tor  depreciation  oi  property,  and  in  case  oi  in- 
surance companies  the  net  addition,  if  any,  required  by 
law  to  be  made  within  the  year  to  reserve  funds  and  the 
sums  other  than  dividends  paid  within  the  year  on  poUcy  j^^tu^i  are  in- 
and  annuity  contracts :  Provided  further,  That  mutual  fire  ^^f^^^  compa- 
insurance  companies  requiring  their  members  to  make 
premium  deposits  to  provide  for  losses  and  expenses  shall 
not  return  as  income  any  portion  of  the  premium  deposits 
returned  to  their  poUcyholders,  but  shall  return  as  taxa- 
ble income  all  income  received  by  them  from  all  other 
sources  plus  such  portions  of  the  premium  deposits  as  are 
retained  by  the  companies  for  purposes  other  than  the 
payment  of  losses  and  expenses  and  reinsurance  reserves: 
Provided  further,  That  mutual  marine  insurance   com-    Mutual  marine 

,,,.,,.,.  »  .  Insurance      com- 

panies shall  include  in  their  return  oi  gross  income  gross  panics. 

premiums  collected  and  received  by  them  less  amounts 
paid  for  reinsurance,  but  shall  be  entitled  to  include  in 
deductions  from  gross  income  amounts  repaid  to  policy- 
holders on  accoimt  of  premiums  previously  paid  by  them 
and  interest  paid  upon  such  amounts  between  the  ascer- 
tainment thereof  and  the  payment  thereof  and  life  in-    Life  insurance 

,     ,,  ,'11  •  •  companies. 

surance  companies  shall  not  include  as  mcome  m  any 

year  such  portion  of  any  actual  premium  received  from 

any  individual  poUcyholder  as  shall  have  been  paid  back 

or  credited  to  such  individual  polic_y holder,  or  treated  as 

an   abatement   of  premium   of  such  individual  pohcy- 

holder,  within  such  year;  (sixth)  the  amount  of  interest    what  interest 

accrued  and  paid  within  the  year  on  its  bonded  or  other  <3ebt«dness  may 

indebtedness  not  exceeding  one-half  of  the  sum  of  its 

interest   bearing  indebtedness   and  its   paid-up   capital 

stock,   outstanding  at  the  close  of  the  year,   or  if  no 


20  INCOME    TAX    LAW. 

capital  stock,    Ihc   aiuoimt  of  interest  paid  witliin  the 

year  on  an  amount  of  indebtedness  not  exceeding  the 

amount  of  capital  employed  in  the  business  at  the  close 

Interest  paid  on  of  tlie  v  ill',  and  in  the  case  of  a  bank,  bankini;  associa- 

deposits  dcducti-  •  '  .  i  ii     •     ,  i 

Mefroiniucoines.  tion,   oi'  trust  compauy,  statmg  separately  al'.  mterest 
paid  by  it  within  the  year  on  deposits;  or  in  case  of  a 
corporation,  joint-stock  company  or  association,  or  in- 
surance coin])any,  organized  under  the  laws  of  a  foreign 
country, interest  so  paitl  on  its  bonded  or  other  indebted- 
ness to  an  amount  t)f  such  bonded  or  other  indebtedness  not 
inu^rcst  on  in- exceeding  the  proportion  of  its  paid-up  capital  stock  oiit- 
cign corporations,  standing  at  the  close  of  the  year,  or  if  no  capital  stock,  the 
amount  of  capital  employed  in  the  business  at  the  close  of 
the  year,  which  the  gross  amount  of  its  income  for  the 
year  from  business  transacted  and  capital  invested  within 
the  United  States  bears  to  the  gross  amount  of  its  income 
derived  from  all  sources  within  and  without  the  United 
Taxes  paid.      States;   {seventh)  the  amount  paid  by  it  within  the  yeai' 
for  taxes  imposed  imder   the   authority  of  the  United 
States  and  separately  the  amount  so  paid  by  it  for  taxes 
imposed   by   the   Government   of   any  foreign   country; 
be^shownTn  re°  (^^5'^^^)  ^^c  net  incomc  of  such   corporation,  joint-stock 
*"™-  company   or   association,    or   insurance   company,    after 

making  the  dedvictions  in  this  subsection  authorized.     All 
such  returns  shall  as  received  be  transmitted  forthwitli 
by  the  collector  to  the  Commissioner  of  Internal  Kevenue. 
All  assessments  shall  be  made  and  the  several  corj)o- 
rations,  joint-stock  companies  or  associations,  and  insur- 
b"  mld^Tnd^n!^  ^i^c<3  companies  shall  be  notified  of  the  amount  for  which 
tioetobegiven.    \}xQj  RFC  respectively  liable  on  or  before  the  first  day  of 
June  of  each  successive  year,  and  said  assessment  shall 
be  paid  on  or  before  the  thirtieth  day  of  June:  Provided, 
That  every  corporation,   joint-stock  company  or  asso- 
ciation, and  insurance  company,  computing  taxes  upon 
tlie  income  of  the  iiscal  year  which  it  may  designate  in 
the  manner  hereinbefore  provided,  shall  pay  the  taxes 
whcTiobe^pafd' ^^^^^  undcT  its  assessment  within  one  hundred  and  twenty 
by    corporation,  (jrjys  after  the  date  upon  which  it  is  required  to  file  its 
list  or  return  of  income  for  assessment;    except  in  cases 
of  refusal  or  neglect  to  make  such  return,  and  in  cases 
of  false  or  fraudulent  returns,  in  which  cases  the  Com- 
When  false  rc-missioncr  of  InterFjrd  Revenue  shall,  upon  the  discovery 

tun)     Ms     been.  e  •  ^ 

rendered    and  thereof,  at  any  time  withm  three  years  after  said  return 

faots      a:e      do- .  '  •'  .     .         •      .  ^        ■        ^ 

tcc'.ed  witliin  .••  is  due,  mokc  a  return  upon  information  obtamed  as  pro- 

ye.i;',      commis-     •  -,     ^  \.       .       ^  .  .  -,  ..,  ,, 

s?u  .ler       may  vidcd  for  ui  this  scction  or  by  existing  law,  and  the  assess- 

make  neA«-  assess-  f    ,  c    t  in 

ment.  ment  made  by  the  Commissioner  of  Internal  Kevenue 


INCOME   TAX   LAW.  21 

thereon  shall  be  paid  by  such  corporation,  joints-stock 
company  or  association,  or  insurance  company  imme- 
diately upon  notification  of  the  amount  of  such  assess- 
ment:  and  to  any  sum  or  sums  due  and  unpaid  after  the 
thirtieth  day  of  June  in  any  year,  or  after  one  hundred 
and  twenty  days  from  the  date  on  which  the  return  of 
income  is  required  to  be  made  by  the  taxpayer,  and  after 
toil  daj^s  notice  and  demand  thereof  by  the  collector, 
there  shall  be  added  the  sum  of  5  per  centum  on  the    Penalty  and  m- 

'■  tcrestincuiT'd  by 

amount  of  tax  unpaid  ana  interest  at  the  rate  of  1  per  faUnre  to  pay  tax 

'■  .  ^  within  prescribed 

contum  per  month  upon  said  tax  from  the  lime  the  same  time, 
becomes  due. 

(d)   When  the  assessment  shall  be  made,  as  provided ,  Returns     ren- 

.  1  •   1  •  dered  to  be  filed 

in  this  section,  the  returns,  together  with  anv  corrections  with      commis- 

'  111  1  "  ••  Rioner  of  Internal 

thereof  which  may  have  been  made  b^  the  commissioner.  Revenue. 
shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open 
to  inspection  as  such:  Provided,  That  any  and  all  such opg^^^^gp^ptjon 
returns  shall  be  open  to  inspection  only  upon  the  order  of  ^°^^qq^''**'°^°°' 
the  President,   under  ndcs   and  regulations  to  be  pre- 
scribed by  the  Secretary  of  the  Treasury  and  approved 
by    the    President:  Promded   further,    That    the    proper 
officers  of  any  State  imposing  a  general  income  tax  may,  * 
upon  the  request  of  the  governor  tliereof,  have  access  to 
said  returns  or  to  an  abstract  thereof,  showing  the  name 
and  income  of  each  such  corporation,  joint  stock  com- 
pany, association  or  insurance  company,  at  such  times 
and  in  such  manner  as  the   Secretary  of   the  Treasury 
may  prescribe. 

If   any  of   the  corporations,  joint-stock  companies  or  ^^.1^^^^^^° ^°l' 
associations,  or  insurance  companies  aforesaid,  shall  re- ^J  jg^^|^^"\^  ^^r 
fuse  or  neglect  to  make  a  return  at  the  time  or  times '"^'i""'^*^ ''®^"™- 
hereinbefore  specified  in  each  year,  or  shall  render  a  false 
or  fraudulent  return,  such  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  shall  be  liable 
to  a  penalty  of  not  exceeding  $10,000. 

H.  That  the  word  ''State"  or  "United  States''  when 
used  ill  this  section  shall  be  construed  to  include  any 
Territory,  Alaska,  the  District  of  Columbia,  Porto  Rico, 
and  the  Philippine  Islands,  when  such  construction  is 
necessary  to  carry  out  its  provisions. 


22  INCOME    TAX    LAW. 

Sees.  3167, 3i?2,     T.  That  soctidus  tlurty-one  hundred  and  sixty-seven, 

3173,     3176,     Re-        -^  ,  ,        ,  ,    ''  ^        ,  ^i   •    ,  i  j       J 

vised     Statutes, t^j^irty.yne  hiir.(h-(Ml  and  seventy-two,  tnu'ty-one  hundred 
and  seventy-three,  and  thirty-one  hundred  and  seventy-six 
of  the  Revised  Statutes  of  the  United  States  as  amended 
are  hereby  amended  so  as  to  read  as  foHows: 
Sec. 3167.  "Sec.   3167.  It  shall  be  unlawful  for  any  collector, 

deputy  collector,  agent,  clerk,  or  other  officer  or  employee 
of  the  United  States  to  divulge  or  to  make  known  in  any 
manner  wliatever  not  provided  by  law  to  any  person  the 
operations,  style  of  work,  or  apparatus  of  any  manufacturer 
or  producer  visited  by  him  in  the  discharge  of  his  official 
duties,  or  the  amount  or  source  of  income,  profits,  losses, 
expenditures,  or  any  particular  thereof,  set  forth  or  dis- 
closed in  any  income  return  by  any  person  or  corporation, 
or  to  permit  any  income  return  or  copy  thereof  or  any 
book  containing  any  abstract  of  particulars  thereof  to  be 
seen  or  examined  by  any  person  except  as  provided  by 
law;  and  it  shall  be  unlawful  for  any  person  to  print  or 
publish  in  any  manner  whatever  not  provided  by  law  any 
income  return  or  any  part  thereof  or  the  amount  or  source 
of  income,  profits,  losses,  or  expenditures  appearing  in  any 
income  return;  and  any  offense  against  the  foregoing 
provision  shall  be  a  misdemeanor  and  be  punished  by  a 
•  fine  not  exceeding  $1,000  or  by  imprisonment  not  exceed- 
ing one  year,  or  both,  at  the  discretion  of  the  court;  and 
if  the  offender  be  an  officer  or  employee  of  the  United 
States  he  shall  be  dismissed  from  office  and  be  incapable 
thereafter  of  holding  any  office  under  the  Government. 
Sec. 3172.  "Sec.  3172.  Every  collector  shall,  from  time  to  time, 

cause  his  deputies  to  proceed  through  every  part  of  his 
district  and  inquire  after  and  concerning  all  persons 
therein  who  are  liable  to  pay  any  internal-revenue  tax, 
and  all  persons  owning  or  having  the  care  and  manage- 
ment of  any  objects  liable  to  pay  any  tax,  and  to  make  a 
a  list  of  such  persons  and  enumerate  said  objects. 
800.3173.  "Sec.  3173.  It  shall  be  the  duty  of  any  person,  part- 

nership, firm,  association,  or  corporation,  made  liable  to 
any  duty,  special  tax,  or  other  tax  imposed  by  law,  when 
not  othervsase  provided  for,  in  case  of  a  special  tax,  on  or 
before  the  thirty-first  day  of  July  in  each  year,  in  case  of 
income  tax  on  or  before  the  first  day  of  March  in  each  year, 
and  in  other  cases  before  the  day  on  which  the  taxes  ac- 
crue, to  make  a  list  or  return,  verified  by  oath  or  affirma- 
tion, to  the  collector  or  a  deputy  collector  of  the  district 
where  located,  of  the  articles  or  objects,  including  the 


INCOME    TAX    LAW.  23 

amount  of  annual  income  charged  with  a  duty  or  tax,  the 
quantity  of  goods,  wares,  and  merchandise  made  or  sold 
and  charged  with  a  tax,  the  several  rates  and  aggregate 
amount,  according  to  the  forms  and  regulations  to  be  pre- 
scribed by  the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treasury,  for  which 
such  person,  partnership,  firm,  association,  or  corpora- 
tion is  hable :  Provided,  That  if  any  person  liable  to  pay 
any  duty  or  tax,  or  owning,  possessing,  or  having  the  care 
or  management  of  property,  goods,  wares,  and  merchan- 
dise, articles,  or  objects  hable  to  pay  any  duty,  tax,  or 
license,  shall  fail  to  make  and  exhibit  a  list  or  return  re- 
quired by  law,  but  shall  consent  to  disclose  the  particu- 
lars of  any  and  all  the  property,  goods,  wares,  and  mer- 
chandise, articles,  and  objects  Uable  to  pay  any  duty  or 
tax,  or  any  business  or  occupation  Uable  to  pay  any  tax 
as  aforesaid,  then,  and  in  that  case  it  shall  be  the  duty  of 
the  collector  or  deputy  collector  to  make  such  Hst  or  re- 
turn, which,  being  distinctly  read,  consented  to,  and 
signed  and  verified  by  oath  or  affirmation  by  the  person 
so  owning,  possessing,  or  having  the  care  and  manage- 
ment as  aforesaid,  may  be  received  as  the  hst  of  such 
person:  Provided  further,  That  m  case  no  annual  list  or 
return  has  been  rendered  by  such  person  to  the  collector 
or  deputy  collector  as  requh-ed  by  law,  and  the  person 
shall  be  absent  from  his  or  her  residence  or  place  of  busi- 
ness at  the  time  the  collector  or  a  deputy  collector  shall 
call  for  the  annual  list  or  return,  it  shall  be  the  duty  of 
such  collector  or  deputy  collector  to  leave  at  such  place 
of  residence  or  business,  with  some  one  of  suitable  age  and 
discretion,  if  such  be  present,  otherwise  to  deposit  in  the 
nearest  post  office,  a  note  or  memorandum  addressed  to 
such  person,  requiring  him  or  her  to  render  to  such  col- 
lector or  deputy  collector  the  list  or  return  required  by 
law  within  ten  days  from  the  date  of  such  note  or  memo- 
randum, verified  by  oath  or  affirmation.  And  if  any  per- 
son, on  being  notified  or  required  as  aforesaid,  shall  re- 
fuse or  neglect  to  render  such  list  or  return  within  the 
time  required  as  aforesaid,  or  whenever  any  person  who 
is  required  to  deliver  a  monthly  or  other  return  of  objects 
subject  to  tax  fails  to  do  so  at  the  time  required,  or  de- 
livers any  return  which,  in  the  opinion  of  the  collector,  is 
false  or  fraudulent,  or  contains  any  undervaluation  or 
understatement,  it  shall  be  lawful  for  the  collector  to 
summon  such  person,  or  any  other  person  having  posses- 


Sec.  3176. 


24  INCOME    TAX    LAW. 

tsiun,  custody,  or  taiv  of  books  of  accoimt  oi>ntaiuiiig  cu- 
tries  relating  to  the  business  oi  sucli  jiei-son,  or  any  other 
person  he  may  deem  proper,  to  appear  before  him  and 
prothice  such  books,  at  a  time  and  place  named  in  the 
summons,  and  to  give  testimony  or  answer  interroga- 
tories, under  oath,  respecting  any  objects  Uable  to  tax  or 
the  returns  thereof.  The  collector  may  summon  any 
pei-son  residing  or  found  within  the  State  in  which  his  dis- 
trict lies;  and  when  the  person  intenchnl  to  be  summoned 
does  not  reside  and  can  not  be  found  within  such  State,  he 
may  enter  any  collection  district  where  such  person  may 
be  found  and  there  make  the  examination  herein  author- 
ized. And  to  this  end  he  may  there  exercise  all  the  au- 
thority which  he  might  lawfully  exercise  in  the  district 
for  which  he  was  commissioned. 

*'Sec.  3176.  When  any  person,  corporation,  company, 
or  association  refuses  or  neglects  to  render  any  return  or 
list  requu-ed  by  law,  or  renders  a  false  or  fraudulent  return 
or  list,  the  collector  or  any  dei)uty  collector  shall  make, 
accordhig  to  the  best  information  which  he  can  obtain, 
including  that  derived  from  the  evidence  elicited  by 
the  examination  of  the  collector,  and  on  his  own  view 
and  information,  such  list  or  return,  according  to  the 
form  prescribed,  of  the  income,  property,  and  objects 
liable  to  tax  owned  or  possessed  or  under  the  care  or 
management  of  such  person  or  corporation,  company 
or  association,  and  the  Commissioner  of  Internal  Revenue 
shall  assess  all  taxes  not  paid  by  stamps,  including  the 
amount,  if  any,  due  for  special  tax,  income  or  other 
tax,  and  in  case  of  any  return  of  a  false  or  fraudulent  list 
or  valuation  intentionally  he  shall  add  100  per  centum 
to  such  tax;  and  in  case  of  a  refusal  or  neglect,  except 
in  cases  of  siclaiess  or  absence,  to  make  a  list  or  return, 
or  to  verify  the  same  as  aforesaid,  he  shall  add  50  per 
centum  to  such  tax.  In  case  of  neglect  occasioned  Ijy 
sickness  or  absence  as  aforesaid  the  collector  may  allow 
such  further  time  for  makmg  and  delivering  such  list 
or  return  as  he  may  deem  necessary,  not  exceedmg 
thirty  days.  The  amount  so  added  to  the  tax  shaU  be 
collected  at  the  same  time  and  in  the  same  manner  as 
the  tax  unless  the  neglect  or  falsity  is  discovered  after 
the  tax  has  been  paid,  m  which  case  the  amount  so 
added  shall  be  collected  in  the  same  manner  as  the  tax; 
and  the  list  or  return  so  made  and  subscribed  by  such 
collector  or  deputy  collector  shall  be  held  prima  facie 
good  and  sufficient  for  all  legal  purposes." 


INCOME    TAX    LAW.  25 

J.  That  it  shall  be  the  duty  of  every  collector  of  internal    Receipts  for  tax 

•^  -^  paid  to  be  given 

revenue,  to  \vhom  any  payment  of  any  taxes  other  than  °y  c°"®<'^°'"- 
the  tax  represented  by  an  adhesive  stamp  or  other  en- 
graved stamp  is  made  under  the  provisions  of  this  sec- 
tion, to  give  to  the  person  making  such  payment  a  fidl 
written  or  printed  receipt,  expressmg  the  amount  paid 
and  the  particular  account  for  which  such  payment  was 
made;  and  whenever  such  payment  is  made  such  col- 
lector shall,  if  requked,  give  a  separate  receipt  for  ^ach^gfJPj^^l^l^^^g^^ 
tax  paid  by  any  debtor,  on  account  of  payments  niade  ^j^g^^^^^'^j^.^^^^^^^ 
to  or  to  be  made  by  him  to  separate  creditors  in  such  form 
that  such  debtor  can  conveniently  produce  the  same 
separately  to  his  several  creditors  in  satisfaction  of  then* 
respective  demands  to  the  amounts  specified  in  such 
receipts;  and  such  receipts  shall  be  sufficient  evidence 
in  favor  of  such  debtor  to  justify  him  in  withholding  the 
amount  therein  expressed  from  his  next  payment  to  his 
creditor;  but  such  creditor  may,  upon  giving  to  his 
debtor  a  full  written  receipt,  acknowledging  the  pay- 
ment to  him  of  whatever  sum  may  be  actually  paid, 
and  accepting  the  amount  of  tax  paid  as  aforesaid  (speci- 
fy mg  the  same)  as  a  further  satisfaction  of  the  debt  to 
that  amount,  require  the  surrender  to  hun  of  such 
collector's  receipt. 

K.  That  jurisdiction  is  hereby  conferred  upon  the  dis-p^j^yg^'^^g^'^j]^^^"^" 
trict  courts  of  the  United  States  for  the  district  within  t^"^*^ /j°']''^«g  ^^"^ 
which  any  person  summoned  under  this  section  to  appear ^^g°gg^g°^g^jp°^  '^^^' 
to  testify  or  to  produce  books  shall  reside,   to  compel 
such  attendance,  production  of  books,  and  testunony  by 
appropriate  process. 

L.  That  all  administrative,  special,  and  general  pro- to  assessment,'^"e? 
visions   of  law,    including   the   laws   in   relation   to   the™on,'and  refund^ 
assessment,  remission,  collection,  and  refund  of  internal- ^|,j^cab]ie?  ™^*^^ 
revenue  taxes  not  heretofore  specifically  repealed  and  not 
inconsistent  with  the  provisions  of  this  section,  are  hereby 
extended  and  made  applicable  to  all  the  provisions  of 
this  section  and  to  the  tax  herein  imposed. 

M.  That  the  provisions  of  this  section  shall  extend  to  lat^g^to" income 
Porto  Rico  and  the  Philippine  Islands:  Provided,  That  the^TrtrS^d 
administration  of  the  law  and  the  collection  of  the  taxes  Fsiands.' ^  ^  '  °  ^ 
imposed  in  Porto  Rico  and  the  Phihppine  Islands  shall 
be  by  the  appropriate  internal-revenue  officers  of  those 
governments,  and  all  revenues  collected  in  Porto  Rico 


26  INCOME    TAX    LAW. 

and  Iho  Philij)pine  Islands  thoreundor  shall  accrue  intact 
to  the  general  governments,  thereof,  respectively:  And 
frovided further,  That  the  jurisdiction  in  this  section  con- 
ferred upon  the  district  courts  of  the  United  States  shall, 
so  far  as  the  Philij)})ine  Islands  are  concerned,  be  vested 
in  the  courts  of  the  first  instance  of  said  islands:  Arid 
provided  further,  That  nothing  in  this  section  shall  be 
held  to  exclude  from  the  computation  of  the  net  income 
the  compensation  paid  any  official  by  the  governments 
of  the  district  of  Columbia,  Porto  Rico  and  the  PhiHp- 
pinelslandsor  the  political  subdivisions  thereof.  *  *  * 
Income  subject  Scction  4  (paragraph  S)  of  the  act  of  October  3,  1913, 
tax^umier  act"  o^f  further  provides  *  *  *  That  a  special  excise  tax  with 
"^'  '  ■  respect  to  the  carrying  on  or  doing  of  business,  equiva- 
lent to  1  per  centum  upon  their  entire  net  income,  shall 
be  levied,  assessed,  and  collected  upon  corporations,  joint 
stock  companies  or  associations,  and  insurance  companies, 
of  the  character  described  in  section  thirty-eight  of  the  act 
of  August  fifth,  nineteen  hundred  and  nine,  for  the  period 
from  January  first  to  February  twenty-eighth,  nineteen 
hundred  and  thirteen,  both  dates  inclusive,  which  said 
tax  shall  be  computed  upon  one-sixth  of  the  entire  net 
income  of  said  corporations,  joint  stock  companies  or 
associations,  and  insurance  companies,  for  said  year,  said 
net  income  to  be  ascertained  in  accordance  with  the  pro- 
visions of  subsection  G  of  section  two  of  this  act:  Pro- 
vided further,  That  the  provisions  of  said  section  thirty- 
eight  of  the  act  of  August  fifth,  nineteen  hundred  and 
nine,  relative  to  the  collection  of  the  tax  therein  imposed 
shall  remain  in  force  for  the  collection  of  the  excise  tax 
One  return  may  herein  provided,  but  for  the  year  nineteen  hundred  and 
special  excise  and  thirteen  it  shaU  not  be  necessary  to  make  more  than  one 
y^M9i3.*^''  ""^  return  and  assessment  for  all  the  taxes  imposed  herein 
upon  said  corporations,  joint  stock  companies  or  asso- 
ciations, and  insurance  companies,  either  by  way  of  in- 
come or  excise,  which  return  and  assessment  shall  be 
made  at  the  times  and  in  the  manner  provided  in  this 
act.     *     *     * 


PREFACE. 


The  accompanying  regulations  embrace  the  various 
administrative  features  of  the  law  (sec.  2,  act  of  Oct.  3, 
1913)  imposing  a  tax  on  incomes.  They  contain  in- 
structions relative  to  the  preparation  of  returns,  etc.,  and 
are  designed  to  assist  both  the  taxpayer  and  tiie  officers 
charged  with  its  enforcement  in  complying  with  the  re- 
quirements of  this  law. 

Liberal  construction  of  the  law  has  been  given  that 
those  charged  with  withholding  the  tax  at  the  source 
may  not  do  so  imnecessarily.  Withholding  agents  may 
forward  evidences  of  non-Uabihty  to  payment,  when  such 
evidences  are  received  by  them,  to  collector  for  the  dis- 
trict in  Heu  of  the  tax.  This  wiU  reheve  them  of  the 
necessity  of  withholding  such  tax. 

The  regulations  are  arranged  according  to  general  sub- 
jects, as  follows: 

Part  1.  Individual  income  returns  and  collections. 

Part  2.  Collections  at  the  source. 

A.  Bonds,  mortgages,  deeds  of  trust,  etc. 

B.  Bonds,  mortgages,  deeds  of  trust,  etc.,  by  first 

bank  or  coUection  agency  where  certificates 
of  owners  are  not  filed. 

C.  Bonds,  mortgages,  dividends,  etc.,  of  foreign 

corporations. 

D.  Salaries,  wages,  rent,  etc. 

E.  Fiduciaries. 

Part  3.  Relative  to  corporations,  joint  stock  companies 
or  associations,  and  insurance  companies. 

Part  4.  Assessment  and  collection. 

All  forms  of  certificates  herein  provided  shall  be  8 
inches  wide  and  3^  inches  from  top  to  bottom,  and  printed 
on  paper  of  substantial  weight  and  texture. 

27 


REGULATIONS. 


Regulations  concerning  the  tax  imposed  by  Section  2,  Act  of  October 
3,  1913,  on  net  income  of  Individuals,  Corporations,  Joint-stock 
Companies,  Associations,  and  Insurance  Companies. 


Treasury  Department. 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C,  January  5,  1914- 

PART   1. 
INDIVIDUAL  INCOME  RETURNS  AND  COLLECTIONS. 

Article  1.  vSection  2  of  the  above-named  act  imposes  abi^®"^""^    *y^° 
tax  of  1  per  centum  (designated  as  the  normal  tax)  on 
net  incomes  arising  or  accruing  from  all  sources  during 
the  preceding  calendar  year  to — 

(a)  Every  citizen  of  the  United  States,  whether  resid- 
ing at  home  or  abroad;  and 

(6)  Every  person  residing  in  the  United  States,  though 
not  a  citizen  thereof;  and 

(c)  From  all  property  owned  and  from  every  business, 
trade,  or  profession  carried  on  in  the  United  States,  by  a 
pei-son  residing  elsewhere. 

Art.  2.  Said  section  also  imposes  an  additional  tax  on    Additional    or 

.  super  tax. 

all   net   incomes    of   individuals    exceeding   $20,000,    as 
follows : 

1  i^er  cent  on  incomes  exceeding  $20,000  and  not  exceeding 
$50,000. 

2  per  cent  on  incomes  exceeding  $50,000  and  not  exceeding 
$75,000. 

3  per  cent  on  incomes  exceeding  $75,000  and  not  exceeding 
$100,000. 

4  per  cent  on  incomes  exceeding  $100,000  and  not  exceeding 
$250,000. 

5  per  cent  on  incomes  exceeding  $250,000  and  not  exceeding 
$500,000. 

6  per  cent  on  incomes  exceeding  $500,000. 

Art.  3.  The  NET  INCOME  shall  consist  of  the  total  ^  Net  income  de- 
gains,  profits,  and  income  derived  from  all  sources  ( desig- 

29 


iV 


30 


INCOME    TAX    REGULATIONS. 


(y 


") 


piite<l. 


r 


1      ;.i 


^ 


\)" 


Gross    income. 
What  it  includes. 


nated  as  gross  income)  less  deductions  numbered  first  to 
sixth,  inclusive,  specifically  enumerated  in  paragraph  B 
\  of  the  act.     (See  article  6.) 

Ji    Normal     tax;     In  comiMiting  tlio  taxabh^  income  for  the  purposes  of 

U   upon  what  com-  i  o  r       i 

'   n'itp<i-  the   normal  tax   there  sliall  be  deducted  from   the  net 

income  as  above  ascertained: 

(a)  The  amount  included  in  the  gross  income  received 
as  dividends  upon  the  stock  or  from  the  net  earnings 
of  any  corporation,  joint-stock  companj^,  association,  or 
insurance  company  which  is  taxable  upon  its  net  income; 

(h)  The  amount  of  income  the  tax  upon  which  has 
been  paid  or  withheld  for  payment  at  the  source;  and 

(c)  The  specific  exemption  of  $3,000  or  $4,000,  as  the 
case  may  be,  except  in  the  case  of  nonresident  aliens. 

Art.  4.  Gross  income  includes  all  gains,  profits,  and 
income  derived  from — 

(a)  Salaries,  wages,  or  compensation  for  personal  ser- 
vice of  whatever  kind  and  in  whatever  form  paid. 

(h)  Professions,  vocations,  business  (including  income 
from  copartnerships),  trade,  commerce,  or  sales  or  deal- 
ings in  property,  growing  out  of  the  ownership  or  use  of 
or  interest  in,  real  or  personal  property. 

(c)  Interest,  rent,  dividends,  securities,  or  transaction 
of  any  lawful  business  carried  on  for  gain  or  profit.  (See 
art.  67  as  to  interest  on  deposits  and  certificates  of 
deposit.) 

(d)  Gains  or  profits  and  income  derived  from  any 
source  whatever,  including  the  income  from,  but  not  the 
value  of,  property  acquired  by  gift,  bequest,  devise  or 
descent. 

The  foregoing  is  held  to  include  all  income,  gains,  and 
profits  arising  or  accruing  from  all  sources  whatever  in 
the  calendar  year  for  which  the  return  is  made,  except  as 
hereinafter  specifically  stated. 

Art.  5.  The  following  items  should  not  be  included  as 
gross  income: 

(a)  Value  of  property  acquired  by  gift,  bequest,  de- 
vise, or  descent  during  the  jcur. 

(h)  Proceeds  of  fife  insurance  policies  paid  upon  the 
death  of  the  person  insured  to  beneficiaries,  or  payments 
made  by  or  credited  to  the  insured,  on  life  insurance, 
endowment,  or  annuity  contracts,  upon  the  return 
thereof  to  the  insm-ed  at  the  maturity  of  the  term  men- 
tioned in  the  contract,  but  this  shall  not  be  construed  to 


Income  exempt 
from  taji^tion. 


INCOME    TAX    REGULATIONS.  31 

mean  that  interest  payments  to  beneficiaries  from  insm*- 
ance  companies  shall  not  be  included  as  income. 

(c)  Income  derived  from  interest  upon  the  obligations 
of  a  State  or  any  political  subdivision  thereof  and  upon 
the  obligations  of  the  United  States  or  its  possessions; 

{d)  The  compensation  of  the  President  of  the  United 
States  in  office  at  the  time  of  the  passage  of  the  act  of 
October  3,  1913,  dm-ing  the  term  for  which  he  was 
elected,  and  the  judges  of  the  Supreme  and  infeiior  courts 
of  the  United  States  in  office  at  the  time  of  the  passage 
of  the  act  of  October  3,  1913; 

(e)  The  compensation  of  all  officers  and  employees  of 
a  State  or  any  political  subdivision  thereof,  including 
public-school  teachers,  etc.  When  such  State  officers 
or  employees  are  compensated  by  the  United  States,  they 
must  include  such  income  as  taxable. 

Art.  6.  Deductions  and  exemptions  allowed  in  computing 
taxable  income  for  the  purposes  of  the  normal  tax. 

Under  paragraph  B  the  following  items  are  to  be  de- j^^g^^'Jf^^^JJ^pl^;; 
ducted  from  the  gross  income :  ^^*p^  ^• 

1.  The  amount  of  necessary  expenses  actually  paid  for 
carrying  on  business,  but  not  including  business  expenses 
of  partnerships  and  not  including  personal,  living,  or 
family  expenses. 

2.  All  interest  paid  within  the  year  on  personal  in- 
debtedness of  the  taxpayer  incurred  in  the  conduct  of 
business.  \    ,) 

3.  All  National,  State,  county,  school,  and  municipal 
taxes  paid  within  the  year  (not  including  those  assessed 
against  local  benefits). 

4.  Losses  actually  sustained  during  the  year  incurred 
in  trade  or  arising  from  fires,  storms,  or  shipwreck  and     V 
not  compensated  for  by  insurance  or  otherwise. 

5.  Debts  due  to  the  taxpayer  which  have  been  actually 
ascertained  to  be  worthless  and  charged  off  within  the 
year. 

6.  Amount  representing  a  reasonable  allowance  for  the 
exhaustion,  wear,  and  tear  of  property  arising  out  of  its 
itee  or  employment  in  the  business,  not  to  exceed,  in  the 
case  of  mines,  5  per  cent  of  the  gross  value  at  the  mine 
of  the  output  for  the  year  for  which  the  computation  is 
made,  hut  not  including  the  expense  of  restoring  property 
or  maTcing  good  the  exhaustion  thereof,  for  which  an  allow- 
ance is  or  has  heen  made,  nor  for  any  amount  paid  for 
new  buildings,  permanent  improvements,  or  betterments, 
made  to  increase  the  value  of  any  property  or  estate. 


32 


INCOME    TAX    REGULATIONS. 


"Gross  value  at  The  term  "gross  value  at  the  mine,"  as  used  iu  paragraphs  H  and  G  of  section 2  of  the 
Uie  mine"  de-  ^ct  of  Ootohor  3,  '013.  proseribinR  a  limit  to  the  amount  which  may  bo  deducted  in  the 
return  of  individuals  and  corjwrations  as  dcprccial  ion  in  the  case  of  mines,  is  held  to 
mean  the  lK)na  fide  market  value  of  ore,  coal,  crude  oil,  and  gas  at  tlie  mine  or  well, 
where  such  value  h  establLshed  by  actual  sales  at  the  mine  or  well;  and  in  case  the 
market  value  of  the  product  of  the  mine  or  well  Ls  established  at  some  other  place  than 
at  the  mine  or  well,  or  on  the  basis  of  tbc  bullion  or  metallic  value  of  the  ore,  tJieu  the 
gross  value  at  the  mine  is  held  to  ))e  the  value  of  the  ore,  coal,  oil,  or  gas  sold,  or  of  the 
metal  produced,  less  transportation,  reduction,  and  smelting  charges. 


7.  The  amount  included  in  gross  income  received  as 
dividends  upon  the  stock,  or  upon  the  net  earnings,  of 
any  corporation,  joint-stock  company,  association,  or 
insurance  company  \vhi(;h  is  taxable  upon  its  net  income. 

8.  The  amount  of  income,  the  normal  tax  upon  which 
has  been  paid  or  withheld  for  payment  at  the  source  of 
income. 

Gift5  or  dona-      None  of  the  above  items  of  deduction  shall  include 

tions  made  dur-  ,,  .,  -         ,  ,.  i      j<  i  -pj       i 

inp  the  year  not moncy  OF  otncr  itcms  oi  valuc  disposed  oi  bv  gilt,  dona- 

to  be  deducted.      ,  •  i  , 

tion,  or  endowment. 


Exemptions  al- 
lowed under  par- 
agraph C. 


Under  paragraph  C  the  personal  exemption  of  $3,000 

or  $4,000,  as  the  case  may  be,  is  to  be  deducted  from  the 

net  income  except  in  the   cases  of  nonresident  aliens. 

(See  arts.  7,  9,  and  10.) 

Tax  computed     Art.  7.  The  act  provides  that  the  said  normal  tax  shall 

on   the   calendar  .  J-  •      i  <<        •  i 

year  except  for  be  comT)uted  ou  the  rcmauider  oi  said  net  mcome  accru- 
ing  during  each  preceding  calendar  year,  and  that  for  the 
year  ended  December  31,  1913,  said  tax  shall  be  com- 
puted on  the  net  income  accruing  from  March  1  to 
December  31,  both  dates  inclusive,  after  deducting  five- 
sixths  only  of  the  specific  exemj^tions  and  deductions 
authorized.  A  specific  exemption,  therefore,  of  $2,500 
or  $3,333.33,  as  the  case  may  be,  will  be  allowed  for  the 
year  1913. 
Income  of  non-      Art.  8,  The  income   of   nom-esident    aliens  subject   to 

resident       aliens    .  ,  .  in  •  p      \'  i 

subject  to  the  nor- the  normal  tax  01  1  per  cent  shall  consist  oi  the  total 
gains,  profits,  and  income  derived  from  all  property 
owned,  and  from  every  business,  trade,  or  profession  car- 
ried on  and  capital  invested  within  the  United  States 
(to  be  designated  as  gross  income),  less  deductions  (1  to 
8,  inclusive)  specifically  enumerated  in  paragraph  B  of 
the  act  (see  Art.  6),  in  so  far  as  said  deductions  relate  to 
said  gains,  profits,  etc. 

de?l^™aCTaph"c     "^^^^  spccific  exemption  in  paragraph  C  of  the  act  can 

e«mputor*tax^^^^  ^®  allowcd  as  a  deduction  in  computing  the  normal 

nonreSd'maUe^'tax  of  nonresidcut  aliens. 
Nonresident     Nonresident  aliens  are  subject  to  additional  or  surtax 

aliens   subject  to    ,  m       i  •        i  c     •    •  j?  ^i       tt    -i     i 

additional  or  sur-the  Same  as  prescribed  in  the  case  ot  citizens  oi  the  Unitea 

tax.  ^ 

States  or  persons  residing  in  the  United  States. 


lerson   or 
persons 


INCOME    TAX    REGULATIONS.  33 

The  responsible  heads,  agents,  or  representatives  of  said 
nonresident  ahens  who  are  in  charge  of  the  property 
owned  or  business  carried  on  or  capital  invested  shall 
make  full  and  complete  return  of  said  income  and  shall 
pay  the  tax  as  provided  herein. 

Art.  9.  Under   paragraph  C,  every  single  person   and  ttoiF'SwedT 
every  married  person  not  living  with  husband  or  wife^fj.|g/ 
in  the  sense  below  defined,  who  has  a  net  income  exceed- "^"^s  apart. 
ing  $3,000  per  annum,  is  liable  to  pay  the  normal  tax 
under  this  law,  but  in  makuig  return  for  such  tax  such 
person  may  claim  an  exemption  of  $3,000  from  his  or  her 
total  net  income. 

Art.  10.  Husband  and  wife  living  together  are  entitled  tioSoweT^S 
to  an  exemption  of  $4,000  only  from  the  aggregate  net 'g^^^^f ^^^t^f  ^J 
mcome  of  both,  which  may  be  deducted  in  making  the^f^^^'^d  ^""^ 
return  of  such  income  for  taxation.     However,  when  the 
husband  and  wife  are  separated  and  living  permanently 
apart  from  each  other  each  shall  be  entitled  to  an  exemp- 
tion of  $3,000. 

If  the  husband  and  wife  not  living  apart  have  separate    n  husband  and 

o      jr  1  -^jfg   have    sepa- 

estates,  the  income  from  both  may  be  made  on  one  return,  ^*^^^*^^^'^  '^H 
but  the  amount  of  mcome  of  each,  and  the  full  name  and  m^e  showmg  in- 
address  of  both,  must  be  shown  in  such  return. 

The  husband,  as  the  head  and  legal  representative  of 
the  household  and  general  custodian  of  its  income,  should 
make  and  render  the  return  of  the  aggregate  income  of 
himself  and  wife,  and  for  the  purpose  of  levj^ing  the  in- 
come tax  it  is  assumed  that  he  can  ascertain  the  total 
arngunt  of  said  mcome. 

If  a  wife  has  a  separate  estate  managed  by  herself  as  ^^J'^ife's  return  of 
her  own  separate  property  and  receives  an  income  of  husbtnd's^return 
$3,000   or   over,  she  may   make  return  of  her  own  in- °^jj^g"^|^^^|  gl 
come,  and  if  the  husband  has  other  net  income,  making 'lud^ed  m  wife's 
the  aggregate  of  both  incomes  more  than  $4,000,   the 
wife's  return  should  be  attached  to  the  return  of  her 
husband,  or  his  income  should  be  included  m  her  return, 
in  order  that  a  deduction  of  $4,000  may  be  made  from 
the  aggregate  of  both  incomes.     The  tax  in  such  case, 
however,   will  be  imposed  only  upon  so  much  of  the 
aggregate  income  of  both  as  shall  exceed  $4,000. 

If  either  husband  or  wife  separately  has  an  income  qy^g^  "if "^  either 
equal  to  or  in  excess  of  $3,000,  a  return  of  annual  net  ^^'l^^f^f^ °J"^Y'o^f 
income  is  required  under  the  law,  and  such  return  niust^^'°°'^°''°'*'^'"- 
include  the  income  of  both,  and  in  such  case  the  return 
24785°— 14 3 


34  INCOME    TAX    REGULATIONS. 

must  be  made  even  though  the  combined  income  of  both 
be  k>ss  than  $4,000. 
Return  re-     Jf  the  aggregate  net  income  of  both  exceeds  $4,000^. 
gale   income   of  an  annual  return  of  their  combined  incomes  must  be  made 

husband  and  wife  .  i         i    i  i  •   i 

is  in  excess  ofm  the  manner  stated,  although  neither  one  se])arately 

$4,000,     although  .  '  ®  rm  •     •       1 

neither  may  have  mavhavo  an uicomeof  $3,000  i)er  annum,     ihey  are  lomtly 

anincomeof         ;'  iTiir  i  ^  r         i 

$3,000  or  over,  and  separately  liable  for  such  return  and  for  the  payment 
of  the  tax. 

tobedetermtaed*  ^^^^'  single  or  married  status  of  the  person  claiming  the 
specific  exemption  shall  be  determined  as  of  the  tune  of 
claiming  such  exemption  if  such  claim  be  made  within 
the  year  for  which  return  is  made,  otherwise  the  status 
at  the  close  of  the  year. 

nerehip^*^ p?oflt"     ^^^'   ^^'  ^^^  ^^  ^^^  prorata  share  of  the  net  profits  de- 
how  reported,     rived  from  a  partnci'ship  business,  whether  or  not  divided 

and  paid  out  shall  be  included  in  the  personal  return  of 

each  partner. 
Partnerships     Art.  12.  Partnerships,  as  such,  are  not  subject  to  the 

as  such.  Hot  hable  ^     '  .     '  •' 

to  tax,  but  state- income  tax,  and  are  only  required  to  make  return  when 

ment  may  be  re-  '  i       z-n  •      •  n  t  i  t-» 

quired.  requested  to  do  so  by  the  Commissioner  of  Internal  Keve- 

nue  or  the  collector  of  internal  revenue  for  the  district  in 
which  said  partnership  has  its  principal  place  of  business; 
and  when  a  return  is  required  it  shall  give  a  complete 
and  correct  statement  of  the  gross  income  of  the  said 
partnership  and  also  a  complete  statement  of  the  actual 
expenses  of  conducting  the  business  of  said  partnership, 
and  the  net  profits  and  the  name  and  address  of  each 
member  of  said  partnersliip,  and  theu'  respective  interest 
in  the  net  profit  thus  reported, 
profits *t"*be^m-  "^^*'  ^^'  '^^^  ^^^  annual  profits  of  a  partnership  when 
madeliy^indi^i-^^i'^i^^^  ^^^  P^i<^^  ^^  ^^^  members  thereof  shall  be  included 
uai partners.  ^jy  gach  individual  partner  receiving  same  in  his  annual 
return  of  net  income,  and  the  tax  shall  be  paid  thereon 
as  required  by  law.  When  the  annual  profits  of  a  part- 
nership are  not  distributed  and  paid  to  the  members 
thereof  the  respective  interest  of  each  member  in  said 
profits  shall  be  ascertained,  and  the  individuals  entitled 
thereto  sliall  include  the  said  amount  in  their  annual 
return  as  a  part  of  their  gross  income,  the  same  as  if  said 
I)rofits  had  been  distributed  and  paid  to  them. 
Individual     Alt.  14.  Undivided  annual  net  profits  of  partnerships 

partnership  i  ^  ^ 

profits.  thus  returned  by  the  individual  members  thereof,  and 

tax  paid  thereon,  shall  not,  when  said  profits  are  actually 
distributed  and  paid  to  such  members,  be  again  included 
in  their  annual  return  as  a  part  of  their  gross  income. 


INCOME    TAX   REGULATIONS. 


35 


Partnerships  owning  interest  coupons  or  registered  in- ^^^g^'^^|^"gj'' 
terest  orders  may  claim  deduction  for  legitimate  expenses  ^^'''^e'ducti'''^™' 
incurred  in  business  by  filing  the  proper  certificate  with 
the  withholding  agent.     (See  article  47.) 


RETURNS. 


A 


\3 
\ 


Where  filed. 


Form  of  return. 


Art.  16.  Each  person  of  lawful  age  whose  net  income  is    when  returns 
$3,000  or  over  shall,  on  or  before  the  1st  day  of  March,  comeofS3,o(wor 
1914,  and  on  or  before  the  1st  day  of   March  each  year  made. 
thereafter,  file  an  accurate  return  of  income  under  oath 
or  affirmation,  except  as  herein  provided.     (See  article  8.) 

If  the  person  making  the  return  of  income  has  his  place 
of  business  in  the  collection  district  in  which  he  resides, 
the  return  shall  be  filed  with  the  collector  of  that  district. 
If  his  principal  place  of  business  is  elsewhere,  the  return 
shall  be  filed  m  the  district  in  which  that  business  is 
located. 

In  the  case  of  an  individual  residing  in  a  foreign  country 
return  shall  be  made  to  the  collector  of  internal  revenue 
for  the  district  where  his  principal  business  is  carried  on 
within  the  United  States. 

Art.  16.  The  required  return  will  be  made  on  Form 
1040  in  accordance  with  the  instructions  printed  thereon, 
and  will  specifically  set  forth — 

1.  All  income  Received  from  each  specific  source  and 
the  total  thereof. 

2.  All  the  separate  items  of  deduction  claimed  under 
paragraph  B  of  this  law. 

3.  The  amount  of  specific  exemption  claimed  under 
paragi'aph  C. 

4.  All  amounts  of  income  upon  which  tax  has  been 
withheld  at  source  by  withholding  agent  or  agents. 

Art.   17.  When  by  reason  of  minority,  insanity,   ab 
sence,  sickness,  or  other  disability,  the  individual  is  un- futhor^ed  agent 
able  to  make  his  own  return,  the  same  shall  be  made  b}^ 
his  guardian  or  duly  authorized  agent. 

In  the  case  of  the  death  of  a  person  whose  net  income  mfafg^'^ra'to^r^to 
for  the  part  of  the  year  during  which  he  lived  was  S3,000^^ofdlath°  '° 
or  over,   return   of  net  income  shall  be   made   by   the 
executor  or  administrator  of  the  estate  of  the  deceased, 
and  in  computing  the  taxable  income  of  such  estate  there 
shall  be  allowed  the  specific  exemption  provided  by  law. 

Art.  18.  When  the  requu'ed  return  has  not  been  made    Notice  of  fauure 

,  ,.  1 .  ,        „  to  file  return   to 

by  a  person  acting  as  guardian,  agent  of  a  nonresident  be    served    on 

1-  1  .•  •  ^1  -J        ■  1-1    guardian  or  agent. 

alien,  or  by  one  acting  in  any  other  capacity  in  which 


When  return 
will  be  made  by 


36  INCOME    TAX    REGULATIONS, 

tho  law  makes  it  a  iluty  for  Jiim  to  represent  the  in- 
dividual, notice  of  failure  to  make  such  return  will  be 
served  upon  such  guardian  or  agent. 

The  person  upon  wliom  such  notice  is  served  may,  how- 

i./fli"lrshow^^^  wlien  the  facts  warrant,  file  evidence  with  the  col- 

lua'krnuira.    '"  lector  sliowiug  t  hat  the  individual  for  whom  he  acts  did  not 

receive  an  income  subject  to  tax  during  tlic  joar,   or 

that  the  said  guardian  or  agent  had  filed  the  return  with 

some  other  collector. 

Returns     not      Alt.  19.  Anv  individual  whose  net  income  is  less  than 

required    of   per-  i  i.    n  i  i  i      i  i 

sons   for   whom  $2 0,000,  lor  whoui  lull  retum  has  been  made  by  others 

tu»l  returns  hav6 

been    made    by  as  witldioldiug  agents,  shall  not  be  required  to  make  a 

others.  tot.'  1 

return, 
jiciiirns  to  be      Art.  20.  If  auv  person  liable  to  pav  an  income  tax  for 

prepared  by  col-     .  i  i      n    c    -i  i  i      i    t  i 

lector  in  certain imnsoU  or  others  sJiall  fail  to  make  and  deliver  tlie  re- 
turn required  by  law,  but  shall  consent  to  disclos(\  the 
])articulars  of  any  business  or  occupation  liable  to  pay 
such  tax,  it  shall  be  the  duty  of  the  collector  or  deputy 
collector  to  make  such  list  or  return,  which  being  dis- 
tinctly read  and  consented  to,  signed,  and  verified  by 
oalli  or  affirmation  by  the  person  liable  to  make  such 
return,  the  same  may  be  received  as  the  list  or  return  of 
sucli  person. 
Refusal  or  neg-     Art.  21.  Ill  case  any  persoii  liable  to  make  return  sliall 

lect  to  make  re-  ,  »  ^  i  ,  t    ,  , 

turn.  neglect  or  refuse  to  make  or  render  a  list  or  return,  or 

sliall  render  a  willfully  false  or  fraudulent  return,  it  shall 
be  the  duty  of  the  collector,  after  due  notice  has  been 
given,  to  make  such  list,  according  to  the  best  informa- 
tion he  can  obtain  by  the  examination  of  such  person, 
or  any  other  evidence.^ 
faiTitrf  "to  make      Wlicu  duly  Certified  by  the  collector,  the  said  fist  thus 
mak^ing  fabe  re!  prepared  sliall  be  the  return  of  said  person  and  the  tax 
*™"-  so  ascertained  to  be  due,  together  with  the  50  per  cent  or 

,  100   per   cent    ])enalty   incurred,    sliall    be   assessed    and 

collected. 
R,etums  to  be      Art.  22.  The  annual  return  must  be  verified  by  oath  or 

verified  by  oath  -^ 

oramrmation.  affirmation  of  the  person  making  the  same.  Collectors  are 
directed  by  law  to  require  every  return  to  be  so  verified 
by  the  person  rendering  it.  The  affidavit  may  be  made 
before  the  collector  for  the  district  or  before  any  officer 
authorized  bv  law  to  administer  oaths. 


1  For  method  of  procedure  in  such  cases,  see  sects.  3173  and  3176,  Rev.  Stat.,  and  also 
Form  1045,  the  form  of  notice  to  be  given  in  such  cases. 


INCOME    TAX    EEGULATIONS.  37 

Art.  23.  When  tlie  return  is  not  filed  within  the  I'o- ttoelS^etiirn 
quired  time  by  reason  of  siclaiess  or  absence  of  the  indi-^^^y^^"'^"*®^- 
•yidual,  .in  extension  of  tinn-  not  exceeding  30  days  from 
March  1,  witliin  wliich  to  file  such  return  may  be  gi-anted 
by  the  collector,  provided  a  written  application  therefor 
is  made  by  the  individual  within  the  period  for  which 
such  exten:  ion  i^  desir'ed. 

Art.  24.  The  annual  returns  will  be  forwarded  by  col-    Returns  to  bo 

.      .  (•  r  forwarded    to 

lectors  bv  i  e^dstcrtHl  man  to  the  Commissioner  of  Internah'"iniju,;.icmer  of 

■  ^'  .  .    ,       ,  internal  Usvenue 

Revenue  with  the  list  for  the  month  in  which  the  retm-nsby  re;,isteied 
are  filed.     Collectors  must  provide  that  said  returns  and 
all  forms  relating  thereto  ai-e  securely  sealed  in  envelopes 
or  packages  before  forwarding  the  same. 

Art.  25.  All  assessments  shall  be  made  by  the  Com-  Assessments; 
missioner  of  Internal  lievenue,  and  all  persons  shall  be  when  to  be  paid! 
notified  of  the  amount  for  which  they  are  respectively 
liable  on  or  before  the  1st  tlay  of  June  of  each  successive 
y(^ar,  and  said  assessments  shall  be  paid  on  or  before  the 
30th  day  of  June,  except  in  cases  of  refusal  or  neglect  to 
make  such  return  and  in  cases  of  false  or  fraadulent 
returns,  iji  which  cases  the  Commissioner  of  Internal 
Revenue  shall,  upon  the  discovery  thereof,  at  any  time 
Hnthin  three  years  after  said  return  is  due,  make  a  return 
upon  information  obtained,  as  provided  by  the  law,  and 
the  assessment  made  by  the  Commissioner  of  Internal 
Revenue  thereon  shall  be  paid  by  such  person  or  pcjsons 
immediately  upon  notification  of  the  amount  of  such 
assessment. 

To   anv  sum  or  sums  due  and  unpaid  after  the  30th    Penalty  for  faii- 

"         ^  i  _  ure  to  pay  tax. 

day  of  June  in  any  year,  and  for  10  days  after  notice  and 
demand  thereof  by  the  collector,  there  shall  be  added  the 
sum  of  5  per  cent  on  the  amount  of  tax  unpaid,  and  in- 
terest at  the  rate  of  1  pej-  cent  per  month  upon  said  tax 
from  the  time  the  same  becann^  due,  except  from  the 
estates  of  insane,  deceased,  or  insolvent  persons. 

Art.  26.  If  any  person,  corporation,  joint-stock  com-fg^ifu®e^|"^ake 
pany,  association,  or  insurance  company  liable  to  make ''^*'"^^^" 
returns  or  pay  tax  ;,hall  refuse  or  neglect  to  make  retm'us 
at  the  time  or  times  specified  in  each  yeai,  such  person 
shall  be  liable  to  a  penalty  of  not  less  than  $20  nor  more 
than  $1,000. 

Any  person  oi-  any  ofhcer  of  any  corporation  lequiredmrking  Wise^^or 
bylaw  to  make,  render,  sign,  or  verify  any  return  whotum^!''^^*'"*'^^" 
makes  any  false  or  fraudulent  return  or  statement  with 


38  INCOME    TAX    REGULATIONS. 

intent  to  defeat  or  evade  the  Rvssessment  required  by 
law  to  be  made  shall  be  guilty  of  a  misdemeanor,  and 
shall  be  fined  not  exceeding  $2,000  or  bo  imprisoned  not 
exceeding  one  year,  or  both,  at  the  discretion  of  the  court, 
with  the  costs  of  prosecution. 

Art.  27.  Nothing  in  the  law  or  these  regulations  shall 
be  construed  to  release  a  taxable  person  from  liability  for 
income  tax,  nor  shall  any  contract  entered  into  after  the 
act  of  October  3,  1913,  took  effect  be  valid  in  regard  to 
any  Federal  income  tax  imposed  upon  a  person  liable  to 
such  pa3^ment. 

Art.  28.  For  regulations  relative  to  the  claiming  of 
exemptions  and  deductions  on  income,  the  tax  on  which 
is  to  be  deducted  and  withheld  at  the  source,  see  article  33. 


PART  2. 

COLLECTIONS  AT  THE   SOURCE. 

Art.  29.  The  deductions  and  payment  of  the  tax  at  theg^Cfij!«<'««^s^,;^t 
source  of  income  applies  only  to  the  normal  tax  imposed  ^^J^^y^^°  1]^^®"°^ 
upon  individuals  and  shall  not  be  construed  to  require  gP^yj^^'^^iYj^'iuahi^ 
any  of  such  tax  to  be  withheld  prior  to  the  1st  day  of  soujc^e^noypera- 
November,  1913.  wi'- 

Art.  30.  Parao:raph  E  of  section  2  of  the  act  provides    Persons,  firms, 

'^      i  -T  etc.,  required  to 

■f^Jj^at withhold   tax   at 

the  source. 

All  persons,  firms,  copartnerships,  companies,  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies,  in  what- 
ever capacity  acting,  including  lessees  or  mortgagors  of  real  or  per- 
sonal property,  trustees  acting  in  any  trust  capacity,  executors,  ad- 
ministrators, agents,  receivers,  conservators,  employers,  and  all 
ofiicers  and  employees  of  the  United  States  ha\-ing  the  control,  re- 
ceipt, custody,  disposal,  or  payment  of  interest,  rent,  salaries,  wages, 
premiums,  annuities,  compensation,  remuneration,  emoluments,  or 
other  fixed  or  determinable  annual  gains,  profits,  and  income  of  an- 
other person,  exceeding  |3,000  for  any  taxable  year,  other  than  divi- 
dends on  capital  stock,  or  from  the  net  earnings  of  corporations  and 
joint-stock  companies  or  associations  subject  to  like  tax,  who  are  re- 
quired to  make  and  render  a  return  in  Ijehalf  of  another,  as  provided 
herein,  to  the  collector  of  his,  her,  or  its  district,  are  hereby  author- 
ized and  required  to  deduct  and  withhold  from  such  annual  gains, 
profits,  and  income  such  sum  as  will  be  sufficient  to  pay  the  normal 
tax  imposed  thereon  by  this  section,  and  shall  pay  to  the  officer  of 
the  United  States  Government  authorized  to  receive  the  same;  and 
they  are  each  hereby  made  personally  liable  for  such  tax. 

Art.  31.  All    persons,    firms,    etc.,    mentioned    in    the    withhouiing 

^  .  agents. 

above-quoted  paragraph  are  referred  to  m  these  regula- 
tions as  "  debtors"  or  ''withholding  agents,"  and  the  word 
"source"  is  to  apply  to  the  place  where  the  income  origi- 
nated and  is  payable. 

Art.  32.  The  income  from  which  the   normal  tax  of    income  as   to 

,.  ,  .T1-1T1  -iiiT  •        which  tax  is  to  be 

1  per  cent  is  to  be  withheld  by  withholdmg  agents  m-  withheld. 
eludes  all  items   of  incomes  exceeding   in   the   aggregate 
$.3,000  and  payable  to  any  one  person  during  the  year, 
except : 

(a)  Dividends  on  capital  stock  or  from  the  net  earnings 
of  corporations  and  joint-stock  companies  or  associations 
and  insurance  companies  subject  to  like  tax. 

39 


40  INCOME    TAX    REGULATIONS. 

(b)  Income  of  an  indivithial  which  is  not  fixed  or  cer- 
tain and  not  payable  at  stated  periods,  or  is  indefinite  or 
irrefi;ular  as  to  amount  or  time  of  accrual,  shall  not  be 

»  \\'ithheld  at  the  source,  but  shall  he  listed  in  the  annual 
return,  of  the  individual,  and  \hr  tax  shall  bo  paid  thereon 
by  him. 

Incomes  derived  from  the  followini:;  professions  and  vo- 
cations come  under  this  head:  Agents  compensated  on 
the  commission  basis,  lawyers,  doctors,  authors,  inven- 
tors, and  other  professional  persons  whose  income  is  irregu- 
lar and  indefinite. 

Such  persons  shall  make  personal  i-eturn  of  all  their 
income,  provided  their  total  net  income  from  all  sources  is 
annffietaS'^'"^'^'^^^  ^^  ^^^^-  ^^^  example:  When  a  lawyer  receives  a 
^'  retainer  of  $5,000  as  a  special  fee,  a  deductioii  therefrom 

shall  not  be  made  by  the  payer;  but  when  a  lawyer  re- 
ceives a  retainer  of  $5,000  per  annum,  and  the  exemp- 
tion claimed  is  $.3,000,  $2,000  of  such  income  would  be 
taxed  and  the  tax  retained  at  the  source;  or  if  his  ex- 
emption claimed  should  be  $4,000,  $1,000  of  such  income 
would  be  taxed  and  the  tax  thereon  \vithheld  at  the 
source. 

(c)  Items  listed  in  article  5,  which  are  Mdiolly  exempt 
from  tax. 

nn^erp^ragraph      ^^^'  33.   (a)   In  all  cascs  where  the  income  tax  of  a 
bemeTw?afwith-P^'^son  is  withheld  and  deducted  and  paid  or  to  be  paid 
holding  agent.      ^^  ^^le  sourcc,  such  pcrson  shall  not  receive  the  benefit 
of  the  deduction  and  exemption  allowed  in  paragraph  C 
(see  arts.  9  and  10)  excepb  by  an  application  to  th(^  col- 
lector for  refund  of  the  tax  unless  he  shall,  not  less  than 
30  days  prior  to  the  day  on  which  the   return  of  his  in- 
come is  due,  file  %vith  the  person  Avho  is  required  to  %\ntli- 
hold   and   pay   tax  for  him,    a  certificate   claiming  the 
benefit  of  such  exemption,  and  ther(mpon  no  tax  shall 
maidng^fiiserep-bt^  withheld  upon   the    amount  of   such  exemption,     if 
oTt°^^n °"xemF°  ^^J  pcrsou  for  the  purpose  of  obtaining  any  allowance 
*'""•  or  reduction  by  virtue  of  a  claim  for  such  exemption, 

either  for  himself  or  for  any  other  person,   knowingly 
makes  any  false  statement  or  false  or  frauclulent  repre- 
sentation, he  shall  be  liable  to  a  penalty  of  $.300. 
del^irag^L^h^B       ^^^  -^^^  shall  any  person  under  the  foregoing  eondi- 
nifd'^w/th'Muh- ^'^^^^^'^  ^^  allowed  the  benefit  of  any  deduction  provided 
Stor.*"^^"^  °'^"^'  i^  subsection  B  (see  art.  6,  1  to  6)  unless  he  shall,  not 
less  than  30  days  prior  to  the  day  on  which  the  return  of 
his  income  is  due,  either  file  with  the  person  who  is  re- 


INCOME    TAX    BErJULATTON-S.  41 

quired  to  mthhold  ami  pa}'-  tax  for  him  a  true  and  correct 
return  (on  Form  1008)  of  his  annual  gains,  profits,  and 
income  from  all  other  sources,  and  also  the  deductions 
asked  for,  and  the  showing  thus  made  shall  then  become 
a  part  of  the  return  to  be  made  in  his  behalf  by  the  person 
required  to  withhold  and  pay  the  tax  and  the  debtor  or 
withholding  agent  will  only  ■\\dthhold  the  tax  on  the  pay- 
ments made  in  excess  of  the  deductions  claimed  on  said 
form.  Or  such  person  may  hkewise  make  application  for 
deductions  to  the  collector  of  the  district  in  which  return 
is  made  or  to  be  made  for  him. 

If  such  person  is  a  minor  or  an  insane  person,  or  is  oif  be'haif of^mN 
absent  from  the  l^iuted  States,  or  is  unable  owing  toperfoa^'  '°'''"^ 
serious  illness  to  make  the  return  and  application  above 
provided  for,  the  return  and  application  may  be  made 
for  him  or  her  by  the  person  requii'ed  to  withhold  and 
pay  the  tax,  he  making  oath  on  certificate  (Form  1009) 
under  the  penalties  of  this  act  that  he  has  sufficient 
knowledge  of  the  affairs  and  propert}^  of  his  beneficiary 
to  enable  him  to  make  a  fuU  and  complete  return  for  him 
or  her,  and  that  the  return  and  appUcation  made  by  liim 
are  full  and  complete. 

((?)  "Wlien,  however,  claims  for  exemption  and  dcdiictions  fund.™^  ^°'^  ^^ 
as  above  described  are  not  filed  withui  the  prescribed 
time,  the  tax  collected  in  excess  can  be  remitted  vjnly  on 
presentation  of  a  claim  for  refund  mider  the  provisions 
of  section  3220,  Revised  vStatntes,  said  claim.s  to  be  made 
cither  by  the  withholding  agent  against  whom  the  assess- 
ment was  made,  or  by  the  person  on  account  of  whom 
such  taxes  were  withheld. 

Claims  for  abatement  of  taxes  eri'oneously  assessed, abatement^ 
or  which  are  excessive  in  amount,  may,  prior  to  collec- 
tion liiereof,  be  filed  under  th^  provisions  of  said  sec- 
tion 3220,  Revised  Statutes,  either  by  the  withholding 
agent  against  whom  the  assessment  was  made,  or  by  the 
]>ersons  on  account  of  whom  stich  taxes  were  withheld. 

In  the  montlily  list  returns  as  now  prescribed  a  space  ^J^xes'^^jti^'jeH 
is  provided  to  show  the  amount  of  taxes  which  the  ^^^th- warded  to  coii^- 

^    .  tor  until  n.i:ic*9 

holdmg  agent  may  remit  to  the  collector  when  such  re- 9^  assossmcnt 

*="      °  -^  have     been     re- 

turns are  filed.     The  withholding  agents  will  not,  how-ceived. 

ever,  forward  to  the  collector  amounts  wilhh(4d  by  him 

until  notices  of  assessment  arc  received  from  the  collector. 

Claims  for  exeniptron  and  deductions  may  be  filed  with 

the  withholding  agent  and  claims  for  deductions  mr>  r  be 


42  INCOME    TAX   REGULATIONS. 

filed  with  the  collector,  not  later  than  SO  days  prior  to 
March  1. 
ag^Tits'to'bo^fSr^     In  casGS  whcFG  clauTis  for  deductions  are  filed  with  the 
of%-d?etTo'nsC()]lect()r  withiii  the  time  prescribed,  the  collector  will 
collator. ^^""^'^ immediately  furnish  the  withholding  ag'^nt  (whose  name 
and  address  must  be  shown  on  Form  lOOS)  with  a  state- 
ment of  the  amount  of  deductions  claimed,  and  said  with- 
holding agent  shall  not  withhold  and  pay  the  normal 
tax  to  the  extent  of  the  deductions  claimed  as  per  said 
list. 

Withholding  agen  ts  should  not  file  their  annual  returnis 
until  after  the  expiration  of  the  time  allowed  persons  to 
file  claims  for  exemptions  and  deductions  and  if  claims 
for  deductions  are  filed  with  the  collector  in  the  required 
time,  yet  not  in  sufficient  time  to  have  the  adjustment 
made  by  the  withholding  agent,  the  collector  will  make 
the  adjustment  on  the  withhohhng  agent's  return  and  in 
reporting  such   withholding   agent  for   assessment   wiU 
make    allowance    for    the    amoimt    of    such    deductions 
claimed.     Notice  of  such  adjustment,  however,  must  be 
furnished  the  withholding  agent. 
to'bTpaiTto  col-      Art.  34.  The  normal  tax  of  1  per  cent  shall  be  deducted 
ector  of     trict.  ^^^^  withheld  at  th'  source,  and  payment  made  to  the 
collector  of  internal  revenue  as  provided  in  the  law,  by 
the  debtor,  or  his,  her,  or  its  didy  appointed  agent  author- 
ized to  make  such  deduction  and  payment, 
by^rae  alenfnot      ^o  other  pcrsou,  firm,  or  organization,  in  whatever 
heid^by^otherCiipacity  acting,  having  the  receipt,  custody,  or  disposal 
agent.  ^f  ^^j  income,  as  herein  provided,  shall  be  required  to 

again  deduct  and  withhold  the  normal  tax  of  1  per  cent 
thereon,  provided  that  any  such  person,  fu-m,  or  organiza- 
tion other  than  the  debtor  who  has  withheld  said  tax, 
shall  file  v/ith  the  collector  of  internal  revenue  for  his,  her, 
or  its  district,  a  certificate  (Form  1006)  showing  from 
whom  and  in  what  amount  the  tax  has  been  so  withheld. 
Returns  to  be      Alt.  35.  Withholding  agents  who  are  required  to  make 

Difldo  to  collGCtor  c?      cj  J. 

of  interaiu  reve-  monthly  retums  will,  on  or  before  the  20th  day  of  each 
month,  file  with,  the  collector  for  their  respective  dis- 
trict ■;  such  returns  for  the  preceding  month,  accom- 
panied by  all  certificates  relating  thereto,  and  there 
shall  also  accompany  said  returns  all  certificates  claiming 
exemptions  and  deductions  which  are  not  required  to  bo 
listed  thereon;  and  on  or  before  the  1st  day  of  j^Tarch  in 
each  year  said  ^vitliholding  agents  shall  hkewise  file  tr.eii' 
annual  returns  for  the  preceding  calendar  yevr.     Annual 


IITCOME    TAX   EEGULATIONS.  43 

returns  (Forms  1041  and  1042)  must  be  accompanied  by 
all  certificates  claiming  exemptions  and  deductions 
relating  thereto. 

Art.  36.  For  regulations  as  to  assessment  and  collec- 
tion of  taxes  from  withholding  agents,  see  article  25  and 
'^  Assessments  and  collections,"  Part  4. 


Income  derived  from  interest  upon  bonds  and  mortgages  or 
deeds  of  trust  or  other  similar  obligations  of  corporations, 
etc. 

Art.  37.  Under  the  Inw  a  tax  of  1  ])er  cent,  designated    Tax  on  income 

1  1  1  (^1  11  <lerived  from  in- 

as  the  normnl  tnx,  shall  be  deducted  at  the  source,  terest  on  bonds, 
beginning  November  1,  1913,  from  all  income  accruing  ducted. 
and  payable  to  any  person  subject  to  such  tax  which 
may  be  derived  from  interest  upon  bonds  and  mortgages, 
or  deeds  of  trust,  or  other  similar  obligations,  including 
equipment  trust  agreements  and  receivers'  certificates 
of  corporations,  joint-stock  companies  or  associations, 
and  insurance  companies,  although  such  mterest  does  not 
amount  to  $.3,000. 

Income  derived  from  the  hiterest  upon  the  obliga-gj^fg^^jfl^Q^^^ 
tions  of  a  State,  county,  city,  or  any  other  political  tj^exlmpt."^** 
subdivision  thereof,  and  upon  the  obligations  of  the 
United  States  or  its  possessions,  is  not  subject  to  the 
income  tax,  and  certificates  of  ownership  in  connection 
with  coupons  or  registered  interest  orders  for  such  inter- 
est will  not  be  required. 

Art.  38.  The  term  "debtor,"  as  hereinafter  used,  shall    Term  "debtor" 

to  apply  to  all 
Derations,  etc., 
[  to  duly  ap- 

'ompaines;  ana  sucn  "' debtor    pointed withhoid- 
may  appoint  withliolding  and  paying  agents  to  act  for  it  agents. 


apply  to  all  corporations,  joint-stock  companies  or  asso-corpc 
ciations,  and  insurance  companies;  and  such  ''debtor"  point 


in  matters  pertaining  to  the  collection  of  this  tax,  upon 
filing  with  the  collector  of  internal  revenue  for  the  dis- 
trict a  proper  notice  of  the  appointment  of  such  agent  or 
agents.  Where  such  withholding  agent  is  so  authorized 
by  the  debtor  corjioration,  ho  may  file  with  the  collector 
of  his  district  the  required  I'cturns  and  accompanying 
certificates  (arts.  50  and  51),  ui  which  case  the  assessment 
of  the  tax  withheld  by  him  will  be  made  in  that  district. 
Unless  such  authority  is  given,  such  reports,  etc.,  will  be 
furnished  by  the  debtor  corpoi-ation  to  the  collector  cf  its 
district  (i.  e.,  the  district  in  which  its  princij)al  financial 


44  INCOME    TAX    REGULATIONS. 

or  business  ofllco  is  located),  \v1um(\  in  such  case,  assess- 
mriit  will  bo  made. 
Tnx  lo  iw  do-      Ai-t.  39.  For  tlie  purpose  of  collcctino;  t"hfi  tax  on  all 

diiptcd  fttifl  with-  ,       ■»        '    .  ... 

hpi'i  iiy  'it?btor(;.()|,pQQg,  ,ji^(i  reeristered  interest  orijjinatinc;  or  payable 

corporation.  ^  '^  r<  n  i      . 

in  the  United  States,  the  source  shall  be  the  debtor  (or 

its  witliholdins:  and  paying  agent  in  the  TTnited  States), 

who  shall  deduct  the  tax  when  same  is  to  be  withlicld, 

Barvr.  and  in-j^,if|  j^o  othcr  bank,  trust  company,  bnnking  firm,  or  indi- 

dividnals   taking  '  .  . 

intcrrst  coupons y^(i^|.,i  faking  couixms  oi'  iiilorest  orders  for  collection,  or 

for  collection.  .  . 

otherwise,  shall  withhold   the  tax   thereon,  where  such 
coupons  or  orders  for  registered  interest  are  accompanied 
ownership* to  nc-^.^'  Certificates  of  ownership  signed  by  the  owners  of  the 
coupons^  for  To*- Worlds  upou  w^hich  tho  interest  matured.     These  certih- 
ectiou.  cates  shall  be  made  on  the  prescribed  forms  and  shall  be 

made  out  by  each  owner  of  bonds  for  the  coupons  or  in- 
terest orders  for  e>ich  separate  issue  of  bonds  or  obliga- 
tions of  each  debtor.     (vSee  Arts.  43  and  46.) 
tilcaifsf"*when     Alt.   40.  Ecsponsiblo  banks,    bankers,    and   collecting 
permitted.         agents  receiving  coupons  for  collection  with  the  aforesaid 
certificates  of  ownership  attached,  may  present  tho  cou- 
pons w^ith   the   attached   certificates   to   the   debtor  or 
withholding  agent  for  collection,  or  such  certificates  7nay 
be  detached  and  forwarded  direct  to  the  Commissioner 
of  Internal  Revenue,   provided  such  bank,   banker,   or 
collecting  agent  shall  substitute  for  such  certificates  its 
Record  to  beowu  Certificate,  and  shall  keep  a  complete  record  of  each 

Icepi  by  collecting  _  '        _  '  ' 

age"'  transaction,  showing 

1.  Serial  number  of  item  received. 

2.  Date  received. 

3.  Name  and  address  of  person  from  whom  received. 

4.  Name  of  debtor  corporation. 

5.  Class  of  bonds  from  which  coupons  were  cut. 
f).  Face  amount  of  coupons. 

7.  Exemptions  from  tax  claimed  by  owner  under  para- 
gi-aph  C. 

For  the  purpose  of  identification,  such  substitute  cer- 
tificates should  be  numbered  consecutively,  and  cor- 
responding numbers  given  the  original  certificates  of 
ownership. 
stituting"^certifi'-  ^he  permission  here  granted  will  extend  to  responsible 
foreTp^''comitriJs°^"riks,  bankers,  and  collecting  agents  in  foreign  coun- 
tries, through  whom  collection  of  such  interest  coupons 
is  made. 


INCOME    TAX    EEGULATIONS.  45 

Tlie  various  substitute  certificates  hereby  authorized 
will  correspond  with  the  form  numbers  of  the  ownership 
certificates  detached  by  the  collecting  agent,  except  that 
the  substitute  certificates'  form  numbers  will  be  followed 
by  the  letter  "a." 

Art.  41.  A  debtor  whose  bonds  may  be  registered,  both  ^^^Norma^^tax^to 
as  to  principal  and  interest,  shall  deduct  the  normal  tax  [^^^^^.P^y^^nt  of 
of  1  per  cent  from  the  accruing  interest  on  all  bonds 
before  sending  out  checks  for  said  interest  to  registered 
owners  or  before  paying  such  interest  upon  interest 
orders  signed  by  the  registered  holders  of  said  bonds 
unless  there  shall  be  filed  with  said  debtor  or  its  fiscal 
agent  (not  later  than  30  days  prior  to  March  1),  through 
whom  said  interest  is  customarily  paid,  the  proper  cer- 
tificates claiming  exemption  from  liability  for  said  tax 
as  herein  provided,  executed — 

By  a  citizen  or  resident  of  the  United  States,  the  bona    claims  for  ex- 
fide  owner  of  the  registered  obligations,  who  may  claim  tax,   by   wiiom 

I  "  I.    ri  J.-  .-,        r    ii         •  same  may  be  filed. 

exemption  under  paragraph  C ,  section  2,  of  tfie  mcome 
tax  law,  or 

By  corporations,  joint-stock  companies,  associations, 
or  msurance  companies  organized  in  the  United  States, 
or  organizations,  associations,  fraternities,  etc.,  which  are 
either  taxable  or  exempt  from  taxation,  as  provided  in 
paragraph  G,  subdivision  (a),  of  the  act,  or 

By  a  bona  fide  resident  and  citizen  of  a  foreign  country, 
claiming  exemption  as  such. 

Art.  42.  If   the  owners  of   the   bonds   are  individuals    certificates    of 
who  are  citizens  or  residents  of  the  United  States,  the  specify  bonds  and 

»  .  ,  -n       1  in  ,1  amoimt  of  inter- 

atoresaid  certmcates  shah  accompany  the  coupons,  or,  est  due. 
with  respect  to  the  interest  on  registered  bonds,  shall  be 
filed  with  payer  of  said  interest,  and  such  certificates 
shall  describe  the  bonds  and  show  the  amoimt  of  cou- 
pons attached  or  the  amount  of  interest  due  such  ownei's 
on  registered  bonds  and  the  name  and  address  of  the^ 
owners,  and  if  registered  in  names  other  than  the  owners 
such  names  with  addresses  shall  also  be  given.  Such 
certificates  shall  also  show  whether  the  claimants  do  or 
do  not  then  claim  exemi^tion  from  taxation  at  the  source,    ciaim  for  ex 

1  !/"(  .•!        ^  1-^^^^^^^  -I  1       emption    u  n  d  er 

under  paragraph  C,  articles  9  and  10  ($3,000,  and  under  paragraph  c. 
certain  conditions  $4,000),  as  to  the  income  represented 
by  such  coupons  or  interest.  The  certificates  will  be 
prepared  on  Form  1000  and  must  show  the  amount,  if 
any,  of  exemption  claimed,  the  total  amount  of  exemp- 
tion to  which  the  claimant  is  entitled  and  must  be  sijrned 


46  INCOME    TAX    REGULATIONS. 

by  the  claimants,  who  shall  iiso  their  ordinary  business 
signatures.     The   certificates   shall   also  show  the  post- 
oflicc  and  street  address  of  the  claimants,  the  internal-rev- 
enue district,  and  the  date  when  signed. 
Certificates      Art.  43.  Dulv  authorized  agents  may  sign  such  cer- 

may  bo  signed  by  '  .  i       • ,  i  i      i  i 

duly  authorized  tilicatcs  lor  tlio  pcrsons  lor  whom  they  act,  and  withhold- 
ing agents,  banks,  or  others,  with  whom  such  certificates 
are  filed,  if  satisfied  as  to  the  identity  and  responsibility 
of  the  persons  so  signing,  shall  stamp  or  write  on  the 
face  of  each  such  certificate  "Satisfied  as  to  identity  and 
responsibility  of  agent,"  giving  name  and  address  of 
be^^vmXT  by  person  thus  certifying.  Certificates  so  verified  may  be 
^gQt3^°'^'°^acce})ted  by  all  other  persons,  firms,  or  organizations  to 
whom  presented,  without  question  as  to  authority  of 
such  agent.  If  the  person,  firm,  or  organization  first 
receiving  such  certificate  is  not  satisfied  as  to  the  agent's 
identity  and  responsibility,  then,  in  that  event,  the  agent 
shall  furnish  evidence  of  his  authority  to  so  act,  which 
will  be  retamed  by  the  person,  firm,  or  organization 
receiving  it,   and   the  certificate  of  ownership  shall  be 

indorsed  as  above  provided. 
Tax  to  be  de-     Art.  44.  Whenever  interest  coupons,  accompanied  by 

payment  of  inter- a  Certificate  of  an  individual  who  is  a  citizen  or  resident 

of  the  United  States,  are  presented  to  a  debtor  or  its 

withholding  agent  for  payment,  or  whenever  interest  is 

payable  to  such  individual  on  a  bond  registered  as  to  both 

principal  and  interest,  the  debtor  or  its  withholdmg  agents 

shall  deduct  and  withhold  the  amount  of  the  normal  tax, 

except  to  the  extent  that  exemption  is  claimed  in  the 

certificate  of  ownership  (Form  1000). 

Where  the  interest  to  be  paid  is  registered,  the  same 

form  of  certificate  shall  be  used  where  exemptions  are 

claimed,  and  it  shall  be  filed  with  the  debtor  at  least  five 

days  before  the  due  date  of  such  interest. 

Tax  on  interest      Art.  45.  If  the  owncrs  of  the  bonds  are  corporations, 

payable    to    ce*  .    .  ,  .  .       .  . 

tain  corporations,  J  omt-stock  companics,    associatious,   or  msurance   com- 
ducted.  panics  organized  in  the  United  States,  no  matter  how 

created  or  organized,  or  organizations,  associations, 
fraternities,  etc.,  which  are  either  taxable  or  exempt 
from  taxation  as  provided  in  paragraph  G,  subdivision  (a) 
of  the  act,  the  debtor  is  not  required  to  withhold  or  de- 
duct the  tax  upon  income  derived  from  interest  on  such 
bonds,  provided  coupons  or  orders  for  interest  from  such 
bonds  shall  be  accompanied  by  a  certificate  of  the  owners 
thereof  certifying  to  such  ownership,  which  certificates 


INCOME    TAX   KEGULATIONS.  47 

Bhall  be  filed  with  the  debtor  when  such  coupons  or  inter- 
est orders  are  presented  for  payment. 

Such  certificate  will  be  made  on  Form  1001,  and  must^i^,^^^!ff'f.*'?„J>f 
be  signed  in  the  name   of  the  organization  (stating  its  t'^^"^^  exemp- 
place  of  business)  by  the  persident,  secretary,  or  some 
other  principal  officer  of  the  said  corporation  or  organi- 
zation duly  authorized  to  sign  same,  and  must  be  prop- 
erly dated. 

Art.  46.  Coupons,  or  orders  for  registered  interest, n on r^s^^fe n"t 
payable  in  the  United  States,  representing  the  interest  ^^'^'^^ 
on  bonds  owned  by  nonresident  aliens,  must  be  accom- 
panied by  the  prescribed  certificate  (Form  1004),  but 
this  certificate  maj'^  be  signed  either  by  the  owner  or,  in 
behalf  of  the  owner,  by  a  reputable  bank  or  bankers  oi 
other  responsible  collecting  agency,  certifying  to  the 
ownership  of  the  bonds  and  giving  the  name  and 
address  of  the  bona  fide  nonresident  and  alien  owners, 
and  when  such  certificate  is  thus  attached  the  normal 
tax  of  1  per  cent  on  such  coupons  or  interest  orders  need 
not  be  withheld  at  the  source  by  the  debtor  or  collecting 
agency.  Unless  such  proof  of  foreign  ownership  is  fur- 
nished, the  normal  tax  of  1  per  cent  should  be  deducted. 

Foreign  organizations  engaged  in  business  within  the 
United  States  are  subject  to  the  normal  tax  of  1  per  cent 
per  annum  upon  the  amount  of  net  income  accruing  from 
business  transacted  and  capital  invested  within  the 
United  States;  but  said  organizations  shall  be  exempt 
from  having  any  part  of  their  income  withheld  by  a 
debtor  or  withholdmg  agent,  and  claim  for  such  exemp- 
tion will  be  made  on  Form  1018. 

Art.  47.  Inasmuch   as  individual  members  of  a  part-«,^®itifi^?*«s 

.  ^  nled  by  partner- 

nership  are  liable  for  income  tax  upon  their  respective ^^^P'^s^o^yj^gm- 

interest  in  the  net  earnings  of  such  partnership,  the  part-^^|  'roflts^'^etc'^' 

nership  may  file  with   the  withholding  agent   a  notice 

signed  in   the  name  of  the  partnership,   by  a  member 

thereof,  claiming  a  deduction  of  a  specific  amount  on 

account  of  the  legitimate  expense  incurred  in  conducting 

the   business  of  said  partnership;  and  upon  receipt  of 

said  notice  said  withholding  agent  shall  not  withhold, 

and  shall  not  be  held  Hable  for,  the  normal  tax  on  the 

amount   of  income   equal  to   the   amount   of  deduction 

claimed  in  said  notice;  but  in  no  event  shall  the  total  of 

the  amounts  claimed,  as  providful  herein,  be  in  excess  of 

the  total  amount  of  the  actual  legitimate  annual  expenses 

incurred  by  said  partnership  in  the  conduct  of  its  busi- 


48  INCOME    TAX    REGULATIONS. 

ness.     A])plk'ation  for  such  deduction  shall  be  made  on 
Form  1011. 
Foreign    part-      Art.  48.  Foreio:!!  i)artnerships  or  firms,  all  the  members 

norships,    certifi-  i  •    i  i        i       •    • 

eatc of ovraership  of  which  aro  botli  citizeiis,  or  subjects,  and  residents  of  a 

may  be  filed  by.  .  '  j  > 

foreign  country,  which  aro  the  owners  of  bonds  and  mort- 
gages or  deeds  of  trust  or  other  similar  obligations,  in- 
cluding equipment  trust  agreements,  receivers'  certifi- 
cates, and  stocks  of  corporations,  joint-stock  companies 
or  associations  and  insurance  companies,  organized  or 
doing  business  in  the  United  States,  may  file  with  the 
debtor  or  withholding  agent,  with  their  cou})ons  or  orders 
for  registered  uiterest,  or  orders  for  other  income  derived 
from  property  or  investments  in  the  United  States,  a 
certificate  and  notice  of  ownershi})  (Form  1016)  setting 
forth  the  above  facts;  and  the  debtor  or  withholding 
agent  shall  not  withhold  any  ])art  of  said  income. 
Foreign    part-     Art.  49.  Whcrc  a  foreign  partnership  or  firm  is  composed 

nership,  com-     „  ,        ,  .  ,  ,         .  i      •    •  p     i       tt    •       i 

posed  of  nonresi-of  both  nonrcsideut  foreigners  and  citizens  ot  the  United 

dent      foreigners  «         •  •  i-  •         i       tt    •       i    n 

and   citizens   of  States,  or  foreigners  residmg  in  the  United  States  or  its 

UHited  States.  '  o  o 

possessions,  the  certificate  of  ownershij)  shall  show  this 
fact,  and  the  name  and  legal  address  of  each  member  of 
said  partnership  who  is  a  citizen  of  the  United  States, 
or  who  is  a  foreigner  residing  in  the  United  States  or  its 
possessions,  shall  be  given  on  the  back  of  said  certificate, 
and  no  part  of  said  income  shall  be  withheld.  The  said 
certificate  and  notice  of  ownership  in  either  case  above 
provided  shall  be  on  Form  1014. 
tum°""''^^^''"^'  -A-rt.  50.  Withholding  agents  are  required  to  file  in 
duplicate  a  monthly  list  return  (Form  1012)  giving  a 
list  of  all  coupon  or  interest  payments  made  on  which 
the  normal  tax  of  1  per  cent  was  deducted  and 
withheld  from  interest  payments  made  upon  bonds  or 
other  similar  obligations,  and  shall  show  the  name  and 
address  ui  full  of  the  owners  of  the  bonds,  amount  of  the 
income,  amoimt  of  exemption  clauned,  amount  of  in- 
come on  which  withholding  agent  is  liable  for  tax,  and 
the  amount  of  tax  \vithheld. 

Forms  1012a,  1012b,  and  1012c  are  to  be  used  where 
Form  1012  does  not  afford  sufficient  space  in  which  to 
enter  all  items. 
m'l)Tt"h7y  list"!  Form  101 2d,  when  necessary  to  be  used,  shall  be  made 
may  be  used.  ^-^  duplicate  and  shall  be  a  summary  of  the  monthly  list 
return,  Form  1012,  as  made  in  detail  by  the  withholding 
agent,  and  the  said  summary  and  lists  thereto  attached 
when  properly  filled  in  and  the  summary  signed  and 


INCOME    TAX   REGULATIONS.  49 

sworn  to  shall  constitute  the  complete  monthly  list  re- 
turn of  the  withholding  agent  making  same  as  fully  as 
if  each  list  attached  to  the  summary  was  signed  and  sworn 
to  separately. 

An  annual  list  return  (Form  1013)  m  duplicate  is  also 
required  to  be  made  by  debtors  or  withholding  agents  of 
the  normal  tax  of  1  per  cent  withheld  from  interest  pay- 
ments made  upon  bonds  or  other  similar  obligations,  and 
it  shall  be  filed  on  or  before  March  1  of  each  calendar 
year. 

Art.  61.  The  monthly  hst  return  in  the  form  as  re-    Monthly  list  to 

1    1  .         1      n  .  PI  11.      constitute  a  part 

quired  herem  shall  constitute  a  part  or  the  annual  Ustof  the  annual  iist 

■••  ■'-  return. 

return  to  be  made  by  debtors  or  withholding  agents,  and 
the  debtor  or  withholding  agent  will  not  be  required,  in 
maldng  an  annual  list  return  of  the  tax  withheld  from 
income  derived  from  interest  upon  bonds  and  mortgages 
or  deeds  of  trust,  or  other  similar  obHgations  of  corpora- 
tions, joint-stock  companies,  or  associations  and  insurance 
companies,  to  again  make  an  itemized  list  of  the  amount 
of  tax  \A4thlield  from  each  person,  but  will  give  in  the 
annual  Hst  return  the  totals  of  the  monthly  Ust  return 
for  each  month  of  the  year  for  which  annual  Hst  return 
is  made. 

All  substitute  certificates  of  collecting  agents,  author- 
ized by  regulations,  that  are  received  by  debtors  or 
withholding  agents  will  be  considered  the  same  as 
certificates  of  owners,  and  in  entering  same  in  making 
monthly  Hst  returns  debtors  or  withholding  agents  will 
enter  the  name  and  address  of  the  collecting  agent  and 
the  number  of  the  substitute  certificate  issued  in  Heu  of 
the  original  certificate  containing  the  name  and  address 
of  the  owner  of  the  bonds.  Until  the  further  ruHng  on  this 
subject  by  this  department  no  Hst  return  is  required  to 
be  made  of  certificates  of  ownership  accompanying  cou- 
pons or  registered  interest  orders  filed  with  a  debtor  or 
withholding  agent  when  the  owners  of  the  hands  are  not 
subject  to  having  the  normal  tax  withheld  at  the  source,  but 
all  such  certificates  of  ownership  shall  be  forwarded  by    certificates    to 

,,  .    ,  •   1  1      1  T  1  'i.^^  forwarded   to 

the   debtor   or   withholding   agent    to    the   collector   oi  collector, 
internal  revenue  for  the  district,  on  or  before  the  20th 
day  of  the  month  succeeding  that  in  which  said  certificates 
of  ownership  were  received. 

24785°— 14 4 


50  INCOME    TAX    REGULATIONS. 

B. 

Income  derived  from  interest  upon  bonds,  mortgages,  etc  , 
paid  by  (irst  bank  or  collecting  agency  "when  certificates  of 
OAvners  are  not  liled. 

Interest     con-     ^ft.  52.  Where  the  coupons  or  interest  orders  are  not 

pons    or    orders,  _  ^  -t^ 

bv^MnTflcate^^^^^^^^^^P*^"^^'*^  ^y  certificates  as  heretofore  prescribed,  the 
first  bank,  trust  company,  banking  firm,  or  individual,  or 
coUocting  agency  receiving  the  coupons  or  interest  orch'rs 
for  collection,  or  otherwise,  shall  deduct  and  withhold  the 
tax  and  shall  attach  to  such  coupons  or  interest  orders  its 
own  certificate  (Form  1002),  giving  the  name  and  address 
of  the  owner  of,  or  the  person  presenting  such  coupons  or 
mterest  orders  if  the  owner  is  not  known,  with  a  descrip- 
tion of  the  coupons  or  interest  orders;  also  setting  forth 
the  fact  that  they  are  withholding  the  tax  upon  them; 
whereupon  the  debtor  shall  not  again  withhold  the  tax 
on  said  coupons  or  interest  orders,  but  in  lieu  thereof 
shall  deliver  to  the  Collector  of  Internal  Revenue  the 
certificate  of  such  bank,  trust  company,  etc.,  which  is 
withholding  such  tax  money. 
Identity  of  per-     Aiiv    corporation,  collectinp;  agency,   or    person    fu'st 

sons      presenting  ^ ''  ^  ^  '  o       o  c/  ^  i 

interest  coupons  receiving  from  the  owner  any  interest  coupons  or  orders 

to  be  establisned.  ®  .  .  "^    .  ^ 

for  the  collection  of  registered  interest  should  require  the 
persons  tendering  such  coupons  or  orders  for  registered 
interest  to  satisfactorily  establish  their  identity. 

Art.  63.  Withholding  agents  receiving  coupons  or 
an^uai^'^Lt  ^°^  interest  orders  not  accompanied  by  certificates  of  owners 
turns.  fjpg  required  to  file  monthly  and  annual  hst  returns  in 

duplicate. 

The  requu-ed  monthly  list  return  (Form  1044)  shall 
give  a  list  of  all  coupon  or  interest  payments  made  on 
which  the  normal  tax  of  1  per  cent  was  deducted  and 
withheld  and  shall  show  the  name  and  address  in  full  of 
the  owner  of,  or  the  person  presenting  such  coupons  or 
interest  orders,  if  the  owner  is  not  known,  amount  of  the 
income  subject  to  tax  and  the  amount  of  tax  withheld. 

An  annual  list  return  (Form  1044a)  is  also  required 
to  be  made  by  such  withholding  agents,  showing  the 
amount  of  tax  withheld  during  the  preceding  year  on  in- 
come of  this  character.  This  return  must  be  filed  on  or 
before  the  1st  day  of  March  of  each  calendar  year. 

The  monthly  list  returns  in  the  form  as  required  herein 
shall  constitute  a  part  of  the  annual  hst  return  to  be  made, 
and  the  withholding  agent  will  not  be  required,  in  making 


INCOME    TAX    REGULATIONS.  51 

an  annual  list  return  of  the  tax  thus  witlilield,  to  again 
make  an  itemized  list  of  tlie  amount  of  tax  withheld  from 
each  person,  but  will  give  in  the  annual  list  return  the 
totals  of  the  monthly  list  returns  for  the  year  for  which 
annual  hst  return  is  made. 

C. 

Income  derived  from  coupons,  checks  or  bills  of  exchange  on 
foreign  bonds,  mortgages,  dividends,  etc. 

Art.  64.  All    pei-soiis,    firms,    or    corporations    under-    couection     of 

!•  j2/i'*iii  1    coupons,  checks, 

taking  for  accommodation  or  pront  (this  includes  hand- buis  of  exchange, 
ling  either  by  way  of  purchase  or  collection)  the  collec- 
tion of  coupons,  checks,  bOls  of  exchange,  etc.,  for  or  in 
payment  of  interest  upon  bonds  issued  in  foreign  coun- 
tries, and  upon  foreign  mortgages  or  Uke  obhgations,  and 
for  any  dividends  upon  stock  or  interest  upon  obligations 
of  foreign  corporations,  associations,  or  insurance  com-  ^^i9«°?e  to  be 

"  ^    .  /  ...  .  obtained       from 

panics  engaged  m  business  m  foreign  countries,  are  re- commissioner 
quired  by  law  to  obtain  a  Hcense  from  the  Commissioner  enue. 
of  Internal  Revenue. 

Art.  55.  Apphcations  for  such  license  (Form  1017)  will,.  Application  for 

^  '■  ....  license      to      be 

be  made  to  the  collector  for  the  district  in  which  suchpiade  to  coUec- 

tor  of  district. 

business  is  to  be  carried  on.  Upon  the  acceptance  of  such 
application  the  collector  will  issue  to  the  applicant  with- 
out cost  a  license  (Form  1010)  which  will  continue  in 
force  until  revoked  or  canceled.  Blank  forms  of  such 
license,  bearing  the  fac  simile  signature  of  the  Commis- 
sioner of  Internal  Revenue,  will  be  furnished  collectors 
on  requisition,  who  will  in  all  cases  countersign  the  same 
before  issuing  it  to  apphcant.  Failure  to  obtain  a  license 
or  to  comply  mth  regulations  is  punishable  by  a  fine  not    Penalty      for 

T         m.^  ^r^^  ■  ■  ,  ,  t'  failure  to  obtain 

exceeding  S5,000  or  imprisonment  not  exceeding  one  year,  license. 
or  both,  in  the  discretion  of  the  court. 

Art.  56.  Where  the  collector  is  not  sufficiently  in- 
formed as  to  the  entire  responsibility  of  the  apphcant,  01*^.^^^?^^^^^^^.^ 
where  in  any  case  he  deems  it  advisable,  the  Commissioner  ^^^  ^^^^■ 
of  Internal  Revenue  may  upon  the  recommendation  of  the 
collector  require  of  the  applicant  a  bond,  in  duplicate, 
with  satisfactory  sureties,  in  a  penal  sum  at  least  equal  to 
the  estimated  amount  of  tax  to  be  withheld  by  such  appli- 
cant during  any  one  year.  A  form  of  bond  to  be  given 
in  such  cases  will  be  furnished  collectors  on  application 
for  the  same.  Where  licenses  are  issued  without  bond, 
the  collector  will  each  year  inquire  into  and  satisfy  him- 
seK  of  the  financial  responsibility  of  the  Hcensce. 


52  INCOME    TAX    REGULATIONS. 

Art.  67.  When  any  person,  finn,  or  corporation  shall 
obtained  *°  for^^'^^'*'  hraiu'li  offices  and  desire  to  collect  fcn-eign  uiterest 
branch  offices,      yj.  (^Hyidond  uiconie  through  said  branch  offices,  the  ap- 
plication for  license  or  licenses  shall  be  made  by  the  per- 
son, firm,  or  corporation  through  its  principal  office  for 
its  brancli  office  or  offices.     Appli(;ation  for  licenses  in 
Application  for  such    cases    shall  be  made  to  tlic  collector  of  internal 

license  to  be  ccr-  t        •  •  i  •    i 

tified  to  collector  revenue  for   the   (hstrict  m  which    the    home    ofhce  is 

of      district      in 

wiiich      1)1  an('ii located.     The  names  and  athh'csses  of  the  branch  offices 

oflices  arc  located.    ,„,„..,  .  ,  t         . 

shall  be  lurmslied  to  tiie  collector  in  the  apphcation  of 
the  said  principal,  and  if  the  requirements  of  the  fore- 
going regulations  have  been  complied  with  to  the  satis- 
faction of  the  collector,  he  shall  certify  this  fact  to  the 
collector  of  internal  revenue  for  the  district  in  which 
the  branch  office  is  located,  and  the  collector  to  whom 
this  certification  is  made  shall  issue  to  such  branch  office 
a  license,  as  in  the  case  provided  in  article  55. 

int^re^^oucctcd      ^^^'  ^^'  "^'^^  Hcenscd  pcrsoii,  firm,  or  corporation  first 

to  be  withheld  by  j.(^.(.eiyi2jq-  aiiv  such  foreign  items  for  collection  or  other- 
agent.  O        .J  o 

\vdsc,  shall  withhold  therefrom  the  normal  tax  of  1  per 

cent,  and  will  be  held  responsible  therefor.     Such  Hcensee 

shall  indorse  or  stamp  on  each  such  coupon,  check,  or 

statement  as  to  bill  of  exchange,  wlieii  practicable,  the  words  "Income 

tax   withheld   to  ...  . 

be  indorsed  or  ap- tax  withheld  bv  "  (giving  liis  or  their  name,  address,  and 

pended    to    cou-  .  "  .  .  . 

pons.checks, etc. date),  whicli  shall  be  sufficient  evidence  to  relieve  subse- 
quent holders  or  purchasers  from  the  duty  of  also  with- 
holdmg  the  mcome  tax. 

If  the  size  or  nature  of  such  coupons,  checks,  etc., 
makes  it  impracticable  to  make  said  indorsement  thereon, 
a  statement  identifying  the  item  on  which  tax  is  with- 
held and  bearing  said  indorsement  may  be  attached 
thereto  with  the  same  effect  as  if  the  indorsement  was 
made  directly  thereon. 
Licensee  to  fur-      ^^^   59    gych   Ucensce    shall    obtain    the    names    and 

nish  collector   of 

of^  taxes^deduct- '^'^^^*^^^®^®^  ^^  ^^^^  pcrsous  from  whom  such  items  are  re- 
ed, etc.  ceived  and  shall  prepare  a  list  of  same  in  duplicate  (on 
Form  1043)  and  file  it  with  the  collector  of  internal 
revenue  for  his  district  not  later  than  the  20th  day  of 
the  month  next  succeeding  the  month  in  which  such 
items  were  paid.  The  list  shall  be  dated,  and  shall 
contam  the  names  and  addresses  of  the  taxable  pei-sons, 
the  character  and  amount  of  income,  amount  of  exemp- 
tion claimed,  amount  of  income  on  which  withholding 
agent  is  liable  for  tax,  and  the  amount  of  tax  witliheld. 
In  addition  to  the  monthly  lists  the  licensee  wiU,  on  or 


INCOME    TAX    REGULATIONS.  53 

before  the  1st  day  of  March  in  each  year,  tile  with  the 
collector  in  duplicate  a  return  (Form  1043a),  showing 
the  amount  of  mcome  paid  and  the  amount  of  tax  with- 
held by  him  during  the  precedmg  year  and  such  other 
information  as  the  form  prescribes. 

The  monthly  hst  return  in  the  form  as  required  herein 
shall  constitute  a  part  of  the  annual  list  return  to  be  made 
by  the  licensee  as  withholding  agent,  and  he  will  not  be 
required,  in  making  an  annual  list  return  of  the  tax  with- 
held from  income  described  in  article  54,  to  again  make 
an  itemized  list  of  the  amount  of  tax  withheld  from  each 
person,  but  will  give  in  the  annual  Hst  return  the  totals 
of  the  monthly  list  return  for  each  month  of  the  year  for 
which  annual  Ust  return  is  made. 

Art.  60.  In  the  event  such  coupons,  checks,  or  bills  of  ^^^^  ^"^^lei 
exchange  above  mentioned  are  presented  for  collection  ^^f|P^  ^  °^*y 
by  an  individual  claiming  the  benefit  of  the  exemptions 
allowable  under  paragraph  C  (arts.  9  and  10),  such  indi- 
vidual shall  be  permitted  to  avail  himself  of  the  exemption 
claimed,  upon  signing  on  the  form  heretofore  prescribed 
for  coupons  payable  in  the  United  States,  and  no  tax  shall 
be  deducted  for  the  amount  of  the  exemption  so  claimed ; 
or  if  such  items  are  presented  by  corporations,  joint-stock    organizations 
companies,  or  associations  and  insurance  companies,  or-^|™^^°^|[^ 
ganized  in  the  United  States,  the  form  of  certificate  here-  ^*  t^®  source, 
tofore  prescribed  for  such  organizations  sliaU  be  used,  and 
in  such  instances  no  tax  shall  be  deducted. 

Art.  61.  In  both  instances  the  hcensee  fu'st  receiving    certificates    of 

.  ,11  .  -n  PIT  •   1    exemption  to  be 

such  items  shall  retain  such  certificates  lor  deuvery  with  forwarded    with 

,         , .  p  .1  1         •  >  1  2     J  •  1  monthly   Ust   re- 

tire fists   aforesaid,    and  with  respect   to  said  coupons,  turns  to  collector. 

checks,   or  biUs  of  exchange,  said  Hcensee  shall  attach 

thereto    (identifying    the    items)    or    indorse    or    stamp 

thereon    the    words    "Income    tax    exemption    claimed 

through"   (giving  name  and  address  of  Hcensee),  which 

sliaU  be  sufficient  evidence  to  refieve  subsequent  holders 

or  purchasers  from  the  duty  of  also  Avithholding  the  tax 

thereon. 

The  provisions  for  coUection  of  the  tax  on  foreign  obli- 
gations herein  set  forth  includes  the  interest  upon  all  for- 
eign bonds,  even  though  the  coupons  may,  at  the  option 
of  the  holder,  be  payable  in  the  United  States  as  well  as 
in  some  foreign  country. 

Art.  62.  All  persons  licensed  shall  keep  their  records  in  ,  Licensee  to 

i-  i^  _  keep  records. 

sucli  manner  as  to  show  from  whom  every  such  item  has 
been  received,  and  such  records  shall  be  open  at  aU  times 
to  the  inspection  of  internal-revenue  officers. 


64  INCOME    TAX    KEGULATIONS. 

D. 

Income  derived  from  -wages,  rent,  interest,  or  other  fixed  and 
determinable  gains,  profits,  and  income. 

ienis%?cf  '^^^'  Art.  63.  The  abovo  title  includes  all  income  derived 
from  salaries,  wages,  rents,  royalties,  interest,  taxable 
annuities,  emoluments,  or  other  fixed  and  determinable 
animal  gains,  profits,  and  income  of  another  person. 
C' Income  derived  from  interest  upon  bonds  and  mort- 
gages, or  deetls  of  trust,  or  other  similar  obligations  of 
corporations,  etc.,"  and  ''Income  derived  from  coupons, 
checks,  or  bills  of  exchange  on  foreign  bonds,  mortgages, 
dividends,  etc.,"  which  have  been  covered  by  regulations 
under  such  titles,  are  not  to  be  mcluded  here.) 

agents  to  deduct      Art.  64.  Copartnerships,  companies,  corporations,  joint- 

and  pay  tax.  ,       ,  •  ...  .  . 

stock  companies  or  associations,  insurance  companies,  m 
whatever  capacity  acting,  including  lessees,  mortgagors 
of  real  or  personal  property,  trustees  acting  in  any  trust 
capacity,  executors,  administrators,  agents,  receivers, 
_  conservators,  employers  and  all  officers  and  employees 
of  the  United  States,  hereinafter  referred  to  as  ''debtors" 
or  withholding  agents,  having  the  control,  receipt,  custody, 
disposal,  or  payment  of  income  as  described  in  article  63, 
shall  deduct  and  withhold  from  such  annual  gains,  profit, 
and  income,  when  the  same  shall  have  reached  an  aggre- 
gate amount  in  excess  of  $3,000,  such  sum  as  will  be 
sufficient  to  pay  the  normal  tax  of  1  per  cent  imposed  by 
law,  and  shall  pay  the  taxes  so  withheld  to  the  collector 
of  internal  revenue  for  the  district  in  which  the  said 
withholding  agent  resides  or  has  his,  her,  or  its  principal 
place  of  business. 
Tax  to  be  with-      Art.   66.  A  withholduig  agent  who  pays  monthly,  or 

held  on  periodical  _        _  ,  .  ir    j  j  i  ^ 

pajments   when  periodically    during    the    year,    interest,    rents,    salaries, 

they       aggregate  '■  ''  tr>  ^  j  i  ^i  j        ^  i 

$3,000.  wages,  etc.,  shall  not  withhold  the  said  tax  until  such 

time  as  the  interest,  rents,  salaries,  wages,  etc.,  shaU  have 
reached  an  aggi'egate  amount  m  excess  of  $3,000.  When 
such  amount  has  been  reached,  such  agent  shall  withhold 
the  tax  on  the  whole  $3,000  and  any  excess  thereof, 
unless  the  person  to  whom  the  income  is  due  files  a  notice 
Exemption  un-  claiming  exemption  under  paragraph  C  (as  provided  in 

der  paragraph   C  s     -  ^  •    ^  i  •    i  i      i  i-  i      n       •    i 

may  beciaimed.  art.  33  (a) ) ,  m  which  casc  the  withholdmg  agent  shah  with- 
hold only  the  tax  on  the  income  in  excess  of  said  exemp- 
tion of  $3,000  or  $4,000  (as  the  case  may  be),  and  the  tax 
so  withheld  shall  be  paid  as  required  by  law. 


INCOME    TAX    REGULATIONS.  55 

Art.  66.  In  case  the  person  to  whom  the  income  is  due  de?  MraerapVB 
is  entitled  to  any  deductions  under  paragraph  B,  he  may  ^^^  ^®  claimed, 
avail  himself  of  such  deductions  by  filing  with  the  with- 
holding agent  Form  1008,  as  provided  in  article  33(b),  in 
which  case  the  withholding  agent  will  only  withhold  the 
tax  on  such  income  in  excess  of  the  deductions  claimed 
on  said  form. 

Art.  67.  Banks,  bankers,  trust  companies,  and  other^^'fhhfid"  by 
banking  institutions  receiving  deposits  of  money,  are  notp^jf  o°°(j^*oJ^|' 
required  to  withhold  at  the  source  the  normal  income  tax 
of  1  per  cent  on  interest  paid,  or  accrued,  or  accruing  to 
depositors,  whether  on  open  accounts  or  on  certificates 
of  deposit;  but  all  such  interest,  whether  paid  or  accrued 
and  unpaid,  must  be  included  in  the  annual  income 
return  of  the  person  entitled  to  receive  such  interest, 
whether  on  open  account  or  on  the  certificate  of  deposit. 

Art.  68.  When  a  note  shall  have  been  given  in  payment  heuf  ra^p'ayment 
of  interest,  rents,  or  other  income  accruing  after  March  or  notes^iven^for 
1,  1913,  the  maker  of  the  note,  as  the  "debtor"  and  as  the"^®"*' 
"source"   where  the  income  originates,  is  required,  in 
paying  such  note,  to  withhold  the  normal  tax  of  1  per 
cent  on  the  entire  amount  of  the  note,  if  in  excess  of 
$3,000,  unless  claim  for  exemption  or  deductions  under 
article  33(a)  or  33(b)  is  filed,  in  which  case  the  said  tax 
shall  be  withheld  only  on  the  amount  of  said  note  in 
excess  of  the  exemption  or  deductions  so  claimed. 

If  any  person  who  has  purchased  or  discomited  any  jj^^^^^^^^^l^  °^ 
such  notes  omitted,   in   acquhing  them  from  previous  ^^^^^^j^^j^^^^j^^s 
holder,  to  make  a  deduction  or  allowance  for  said  tax,  he^^''^- 
can  look  for  relief  only  to  the  person  from  whom  the  notes 
were  obtained,  as  the  "debtor,"  the  maker  of  said  notes, 
is  required  to  deduct,  withhold,  and  pay  to  the  collector 
of  internal  revenue  the  amount  of  the  normal  tax  of  1  per 
cent  which  may  be  due  thereon. 

Art.  69.  Withholding  agents  shall  make  an  annual  list  Annual  list  re- 
return  (r'orm  1042),  m  duplicate,  to  the  collector  of  m- iioiding  agents. 
ternal  revenue  for  the  district  in  which  the  withholding 
agent  resides  or  has  his  principal  place  of  business  on 
or  before  the  1st  day  of  March  in  each  year,  showing 
the  names  and  addresses  of  persons  who  have  received 
incomes  in  excess  of  S3, 000,  on  which  the  normal  tax 
of  1  per  cent  has  been  deducted  and  withheld  during 
the  preceding  year.  This  return  must  be  accompanied 
by  all  forms  presented  claiming  exemptions  and  deduc- 
tions. 


56  INCOME    TAX    REGULATIONS. 

E. 

Fiduciaries. 

as  "nd'u^^iar'^y  Art.  70.  Giiardians,  trustees,  executors,  aduunistrators, 
agents,  to  deduct  .^^^j^^^^  receivers,  conservators,  and  all  ])crsons,  corpora- 
tions, or  associations  acting;  in  any  fiduciary  capacity 
hereinafter  referred  to  as  fiduciary  agents,  who  hold  in 
trust  an  estate  of  another  ])erson  or  j)ersons,  shall  bo  des- 
ignated the  "source"  for  the  j)Ui'pose  of  collecting  the  in- 
Notice  of  de- come  tax,  and  bv  filing  notice  with  other  debtors  or  with- 

duction  tobefiled  '  "  .  ^     . 

with  other  with-holduig  agents  said  fiduciary  shall  be  exempt  from  having: 

holding  agents.  .  ^  '^ 

an}'  mcome,  due  to  them  as  such,  withheld  for  any  income 
tax  by  an}'  other  debtor  or  withholding  agent.  Other 
debtors  or  withholding  agents  upon  receipt  of  such  notice 
shall  not  withhold  any  j)art  of  such  income  from  said  fidu- 
ciary and  will  not  in  such  case  be  hold  liable  for  normal 
tax  of  1  per  cont  due  thereon.  The  form  of  notice  to  be 
filed  with  the  debtor  or  withholding  agent  by  fiduciary 
will  be  on  Form  1015.  A¥here  such  exemption  is  not 
claimed,  notice  thereof  on  Form  1019  should  be  filed 
with  the  withholding  agent, 
tob^made'foth^  ^^^'  '^^'  Fiduciaries  shall,  on  or  before  March  1  of  each 
d^stric^  °'  ^^®year,  make  and  render  a  return  of  the  income  coming  mto 
their  custody  or  control  and  management  from  each  trust 
or  estate  when  the  annual  interest  of  any  beneficiary  in 
said  trust  or  estate  is  in  excess  of  $.3,000.  This  return 
(Form  1041)  must  be  filed  with  the  collector  for  the 
distiict  in  which  the  fiduciary  resides  or  has  his  principal 
place  of  business,  and  shall  contain  an  itemized  statement 
of  the  gross  income  and  deductions  claimed. 

Notice  of  failure  to  file  return  as  required  shall  be 
served  upon  the  fiduciary.      (See  art.  18.) 

The  entries  on  the  first  page  of  Form  1041  in  column 
headed  ''Amount  of  income  paid  or  accrued  to  bene- 
ficiaries'" should  not  include  their  respective  shares  of  in- 
come derived  from  dividends  on  the  stock  or  from  the 
net  earnings  of  corporations,  joint-stock  companies,  etc., 
subject  to  like  tax  or  the  income  on  which  the  normal 
tax  of  1  per  cent  has  been  deducted  and  withheld  at  the 
source  by  the  debtor  or  the  prior  withholding  agent,  as 
these  two  items  of  income  are  treated  as  deductions  in 
determining  the  amount  of  income  subject  to  tax  for 
which  the  fiduciary  as  withholding  agent  has  to  account. 


INCOME   TAX   KEGULATIONS.  57 

Wlien  the  share  of  iiny  beneficiary,  therefore,  in  tlie 
amount  stated  on  hne  3  of  the  first  page  of  said  return  is 
in  excess  of  $3,000,  return  must  be  made. 

Art.  72.  As  each  such  fiduciary  acts  solely  in  behalf  of  pi^^'g*"™jji^°  gl 
the  beneficiaries  of  the  trust,  the  annual  return  required  f°o'JJf^rusMmie°l 
in  such  cases  has  reference  only  to  the  income  accruing ?^*g^^j'''^^® ^^'J^°^: 
and   payable    through    said   fiduciary,    and    not   to    the^'^""^- 
income  of  the  beneficiary  derived  from  other  sources.     If, 
howerer,  such  fiduciary  is  legally  authorized  to  act  for 
such  beneficiary  as  agent  or  attorney  in  fact,  he  may  in 
such  case  also  make  for  the  beneficiary  the  personal  annual 
return  (Form  1040)  required  bylaw. 

Art.  73.' The  annual  return  of  the  fiduciary  shall  con- ^^^""uai^  return 
tain  a  fist  of  the  name  and  full  address  of  each  beneficiary  ^beneficiaries, 

'^  snowing    tax 

and  the  share  of  said  income  to  which  each  may  be  enti- ^^Jj^*'^*^  from 
tied.  There  must  also  be  entered  opposite  the  name  of 
each  beneficiary  the  amount  of  exemption,  if  any, 
claimed  by  him,  the  amount  of  income  on  which  the 
fiduciary  is  Hable  for  tax,  and  the  amount  of  tax  with- 
held, and  the  said  return  shall  be  signed  and  sworn  to  by 
the  fiduciary,  if  an  individual,  making  same,  and  his  full 
addrevss  must  be  stated.  If  the  fiduciary  is  an  organiza- 
tion, the  return  shall  be  signed  and  sworn  to  by  the 
president,  secretary,  or  treasurer  of  said  organization. 

Art.  74.  Fiduciaries  having  control  of  any  portion  of  an  jj^^^fg"™  *"  ^® 


of    imdis- 


annual  income  accruing  during  the  year,  but  not  dis- ^^^^^j.*;^^.^'^  "during 

tributed  or  paid  to  the  beneficiaries  during  the  year,  shall,  the  year. 

m  rendering  their  annual  return  (Form  1041),  give  the 

name  and  address  of  each  of  said  beneficiaries  having  a 

distributive  interest  in  said  income,  and  shall  furnish  all 

uiformation  called  for  in  such  returns.     The  fiduciary 

shall  in  all  such  cases  withhold  and  pay  to  the  collector, 

as  provided  by  law,  the  normal  tax  of  1  per  cent  upon 

the  distributive  interest  of  each  of  said  beneficiaries  when 

in  excess  of  $3,000,   the  same  as  if  said  income  was 

actually  distributed  and  paid.     Exemption  under  para- 

gi-aph  C,  however,  may  be  claimed  by  the  beneficiary  or^^^^^'^  ^°l  ^^;_ 

his  legal  rej^resentative  by  filing  his  claim  for  exemption ^jjS^i^"*®'|,^j.°- 

with  the  fiduciary  agent.  sravh  c. 

Art.  75.  When  the  normal  tax  on  undivided  annual  net  ^^''^^^^jj^j^^g*^^^^. 
income  has  been  so  withheld,  such  tax  shall  not  be  again ^^™j^  "witiSiew 
withheld  when  such  portion  of  the  income  is  actually  dis- ^1^^^° ^^^^°™®  ^ 
tributed  and  paid  to  said  beneficiary. 


58  INCOME    TAX    REGULATIONS, 

PART  3. 

RELATING  TO  THE  INCOME  TAX  IMPOSED  BY  SECTIONS  2  AND 
4  OF  THE  ACT  OF  OCTOBER,  3,  1913,  ON  CORPORATIONS,  JOINT- 
STOCK  COMPANIES  OR  ASSOCIATIONS,  AND  INSURANCE  COM- 
PANIES. 

subject\'o'tax'"°'  Art.  76.  Uiidor  the  provisions  of  s(>ctions  2  and  4  of 
the  act  of  October  3,  1913,  every  corporation,  joint-stock 
company  or  association,  and  every  insurance  company 
organized  in  the  Unitcnl  vSlates,  no  matter  how  created  or 
organized,  except  those  specifically  ex(>mpted,  shall  be 

en?^ene\'^tocom"^^'^i^^^  ^^  P^^  annually  an  income  tax  of  1  per  centum  per 
annum  upon  the  entire  net  income  arising  or  accruing  from 
all  sources  during  tlie  preceding  calendar  or  fiscal  year, 
as  the  case  may  be.  Certain  exce})tions  as  to  taxability 
will  be  noted  sijecifically  hereinafter. 

po^atfoS\ubject     Art.  77.  A  similar  tax  shall  be  levied,  assessed  against, 

to  the  tax.  ^^^^^  paid  annually  by  corporations,  joint-stock  companies 

or  associations,  and  insurance  companies  organized, 
authorized,  or  existing  under  the  laws  of  any  foreign 
country  upon  the  amount  of  net  income  accruing  from 
business  transacted  and  capital  invested  within  the  United 
States  during  such  year. 

detoe(?°'^'*"°"^  ^^^'  '^^'  ''Corporation"  or  "corporations,"  as  used  in 
these  regulations,  shall  be  construed  to  include  all  cor- 
porations, joint-stock  companies  or  associations,  and  all 
insurance  companies  coming  within  the  terms  of  the  law, 
and  such  organizations  will  hereinafter  be  referred  to  as 
"corporations. " 

re^  estate  trus"!'  •^^*'  '^^'  ^^  ^^  immaterial  how  such  corporations  are 
etc.,  subject  to  created  or  organized.  The  terms  "joint-stock  com- 
panies" or  "associations"  shall  include  associates,  real 
estate  trusts,  or  by  whatever  name  known,  wliich  carry 
on  or  do  business  in  an  organized  capacity,  whether  organ- 
ized under  and  pursuant  to  State  laws,  trust  agreements, 
declarations  of  trusts,  or  otherwn.se,  the  net  income  of 
which,  if  any,  is  distributed,  or  distributable,  among  the 
members  or  share  owners  on  the  basis  of  the  capital  stock 
which  each  holds,  or,  where  there  is  no  capital  stock,  on 
the  basis  of  the  proportionate  share  of  capital  which  each 
has  invested  in  the  business  or  property  of  the  organiza- 
tion, all  of  which  joint-stock  companies  or  associations 
shall,  in  their  organized  capacity,  be  subject  to  the  tax 
imposed  by  this  act. 
requiJe^d'to^makl  ^^^'  ^^-  Every  Corporation  not  specifically  enumerated 
returns.  ^s  exempt  shall  make  the  return  of  annual  net  income 


INCOME    TAX    EEGULATIONS.  59 

required  by  law  whether  or  not  it  may  have  any  income 
hable  to  tax,  or  whether  or  not  it  shall  be  subordinate  to 
or  controlled  by  another  corporation.  Mutual  telephone  jj^^q^Iq^  ^y* 
companies,  mutual  insurance  companies,  and  like  organi-  ^mpanfes^^'^^S^ 
zations,  although  local  in  character,  and  whose  income  ^^®™p*- 
consists  largely  from  assessments,  dues,  and  fees  paid 
by  members,  do  not  come  within  the  class  of  corporations 
specifically  enumerated  as  exempt.  Their  status  under 
the  law  is  not  dependent  upon  whether  they  are  or  are 
not  organized  for  profit.  Not  coming  mthin  the  statu- 
tory exemption,  all  organizations  of  this  character  -will 
be  required  to  make  returns  of  annual  net  income,  and 
pay  any  income  tax  thereby  shown  to  be  due.  For  this 
purpose  the  surplus  of  receipts  of  the  year  over  expenses 
will  constitute  the  net  income  upon  which  the  tax  ^^ill 
be  assessed. 

A  railroad  or  other  corporation  which  has  leased  its 
properties  in  consideration  of  a  rental  equivalent  to  a 
certain  rate  of  dividends  on  its  outstanding  capital  stock 
and  the  interest  on  the  bonded  indebtedness,  and  such 
rental  is  paid  b}^  the  lessee  du'ectly  to  the  stock  and  bond 
holders,  should,  nevertheless,  make  a  return  of  annual 
net  income  showing  the  rental  so  paid  as  having  been 
received  by  the  corporation. 

Art.  81.  A  railroad  company  operating  leased  or  pur- tiJn*^bTco1^pora- 
chased  lines  shall  include  all  receipts  derived  therefrom,  [g^^j    o?^''^pS> 
and,  if  bonded  mdebtedness  of  such  lines  has  been  as- ''^^^  ^"^^" 
sumed,  such  operating  company  may  deduct  the  interest 
paid  thereon  to  an  amount  not  exceeding  one-half  of  the 
sum  of  its  interest-bearing  indebtedness  and  its  paid-up 
capital  stock  outstanding  at  the  close  of  the  year. 

Art.  82.  Corporations  operatmg  leased  lines  should  no t,. lessee  corpora- 

■i    _  ^  °  tions  not  to   m- 

mclude  the  capital  stock  of  the  lessor  corporations  in'^l"*^,''       capital 

.  ■'•  _  -i  stock  or  indebted- 

their  own  statement  of  capital  stock  outstanding  at  the  ^^^^  9^  lessor  cor- 

^    ^  "  po rations. 

close  of  the  year.  The  indebtedness  of  such  lessor  cor- 
porations should  not  be  mcluded  in  the  statement  of  the 
indebtedness  of  the  lessee  unless  the  lessee  has  assumed 
the  same.  Each  leased  or  subsidiary  company  will  make 
its  own  separate  return,  accounting  for  therein  all  income 
which  it  may  have  received  by  way  of  dividends,  rentals, 
interest,  or  from  any  other  source. 

Art.  83.  A  foreign  corporation  having  several  branch  ^^^^^^^sn  ^corpo- 
offices  in  the  United  vStates  should  designate  one  of  such^^'^Pt^^  If^^^  ^ 
branches  as  its  principal  office  and  should  also  designate  ^f^^f^f^®^  P'""^" 
the  proper  officers  to  make  the  required  return. 


GO  INCOME    TAX    REGULATIONS. 

orpauiLTd^uHnl      ^^'^'  ^^-  '^    corporatiuii    organized    cluriiig    tho    year 
lunls'*'  '"'*''*'  "^  t^liould  render  a  sworn  return  on  the  prescribed  form, 
covering  that  portion  of  the  year  (calendar  or  fiscal)  dur- 
ing which  it  was  engaged  in  business  or  had  an  income 
accruing  to  it. 
goh^nuJ'^iuTu^      ^^^'  ^^'  Corporations  going  into  licpiidation  during  any 
dation.  ^.^^  ])eriod  may,  at  the  time  of  such  Hquidation,  prepare 

a  ''final  return"  covering  the  income  received  or  accru(!d 
to  thcim  during  the  fractional  ])art  of  the  year  during 
which  they  were  engaged  in  business,  and  immediat(^ly 
file  the  same  with  the  collector  of  the  district  in  which 
the  corporations  have  their  principal  places  of  business. 

iiersw^s*^'^  ^'^^'  ^^^'  ^^'  Limited  partnerships  are  held  to  be  corpo- 
rations within  the  meaning  of  this  act  and  these  regula- 
tions, and  in  their  organized  capacity  are  subject  to  the 
income  tax  as  corporations. 

exemp?from^tS^  ^^^-  ^'^'  ^he  act  s])ecifically  enumerates  and  exempts 
from  its  provisions  and  reqiurements  labor,  agricultural, 
or  horticultural  organizations,  mutual  saAdiigs  banks  not 
having  a  capital  stock  represented  by  shares,  fraternal 
beneficiary  societies,  orders,  or  associations  operating 
under  the  lodge  system,  or  for  the  exclusive  benefit  of 
the  members  of  a  fraternity  itself  operating  under  the 
lodge  system,  and  pro^dding  for  the  payment  of  life,  sick, 
accident,  and  other  benefits  to  the  members  of  such  soci- 
eties, orders,  or  associations,  and  dependents  of  such  mem- 
bers, domestic  building  and  loan  associations,  cemetery 
companies  organized  and  operated  exclusively  for  the 
mutual  benefit  of  their  members,  any  and  all  corpora- 
tions or  associations  organized  and  operated  exclusively 
for  religious,  cliaritable,  scientific,  or  educational  pur- 
poses, no  part  of  whose  net  income  inures  to  the  benefit 
of  any  private  stockliolder  or  individual,  business  leagues, 
cliambers  of  commerce,  or  boards  of  trade  not  organized 
for  ])rofit,  no  part  of  the  net  income  of  which  inures  to  the 
benefit  of  the  i)rivate  stockholder  or  individual,  and  civic 
leagues  or  similar  organizations  not  organized  for  profit, 
but  operated  exclusively  for  the  promotion  of  social 
welfare. 
■Domostic build-      Domestic  building   and   loan   associations   are   among 

ingand  loauasso-  *=  _  o 

ciations  defined,  tiiose  enumerated  as  exempt  from  the  requirements  of 

Mntiiahty  essen-  -i  •      <         •     i     i  i 

tiai-  the  law.     A  domestic  building  and  loan  association  is  held 

to  be  one  organized  under  and  pursuant  to  the  laws  of  the 
United  States,  or  of  a  State  or  Territory  thereof,  or  under 
the  hiws  applicable  to  Alaska  or  the  District  of  Colum- 


INCOME   TAX   REGULATIONS.  61 

bia.  Mutuality  in  operation  and  in  the  distribution  of 
profits  and  benefits  is  essential  to  exemption.  There- 
fore, in  order  to  come  within  the  exempted  class  such 
associations  must  not  only  be  ''Domestic/'  as  defined, 
but  they  must  be  organized  and  operated  exclusively 
for  the  mutual  benefit  of  the  members;  that  is,  all  the 
profits  and  benefits  provided  for  in  the  articles  of  asso- 
ciation and  by-laws  must  be  ratably  distributed  among 
all  members  regardless  of  the  kind  of  stock  held,  according 
to  the  amount  of  money  they  have  on  deposit.  An 
association  issuing  different  classes  of  stock  upon  which 
different  rates  of  interest  or  dividends  are  guaranteed 
or  paid,  does  not  come  within  the  exempted  class. 

Art.  88.  All  corporations  and  all  beneficiary  societies    corporations 

11  1      11    1  nr-  1        •  1  •  must  esta  b  1  i  s  h 

enumerated   above  shall   by   affidavit,   or   other\\-ise,   at  their  right  to  ex- 

r  •      •  c  T  1  emption. 

the  request  of  the  collector  or  Commissioner  of  Internal 
Revenue,  establish  their  right  to  the  exemption  provided, 
in  which  case  it  will  not  be  sufficient  to  merely  declare 
that  they  are  exempt,  but  they  must  show  the  character 
and  purpose  of  the  organization,  the  manner  of  distribut- 
ing the  net  income,  if  any,  or  that  none  of  the  net  income 
inXires  to  the  benefit  of  any  private  stockholder  or  indi- 
vidual. In  the  absence  of  such  a  showing,  siicli  organiza- 
tions may,  at  any  time,  be  required  to  make  returns  of 
aimual  net  income  or  disclose  their  books  of  account  to  a 
revenue  officer  for  examination  in  order  that  the  status 
of  the  company  may  be  determmed. 

Art.  89.  A  society  or  association  ''operating  under  the    society  or  asso- 

,,  ,,..,  ,  .,  ciation  subject  to 

lodge  svstem     is  considered  to  be  one  organized  under  a  exempt  ion  d  e  - 

o  fined. 

charter,  with  properly  appointed  or  elected  officers,  with 
an  adopted  ritual  or  ceremonial,  holding  meetings  at 
stated  intervals,  and  supported  by  fees,  dues,  or  assess- 
ments. 

Art.  90.  Cemetery  companies  organized    and   operated  panl^^  or|aniz?d' 
exclusively  for  the  mutual  benefit  of  then*  members  are  fi[  oTtheh-' mem- 
exempt.     The  provisions  of  the  law  clearly  indicate  that'^^''^'^''^™pt- 
companies  which  operate  cemeteries  for  profit  are  Uable 
to  the  tax.     The  status  of  cemetery  associations  under 
the  law  will,  therefore,  depend  upon  the  character  and 
purpose  of  the  organization  and  what  disposition  is  made 
of  the  income. 

Art.  91.    Any  corporation,    concerning    whose    status    corporations 

]  ,,  ii-  iii  1-11  whose  status  as  to 

under  tne  law  there  is  any  doubt,  or  wliich  does  not  exemption  is  in 

I         ,  •   1  •  1  r-     1  1  !■     1  doubt  must  make 

Clearly  come  withm  one  or  another  of  the  classes  of  those  return, 
specifically  enumerated  as  exempt,  should  file  a  return 


C2  INCOME    TAX    REGULATIONS. 

(ill  blank  if  desired)  and  allacli  Uieieti)  a  statement  sot- 
ting out  fully  tlio  nature  and  purj)ose  of  the  organization, 
the  source  of  its  income,  and  what  disposition  is  made  of 
it,  and  particularly  of  any  surplus. 
Cooperative      Art.  92.  Cooperative    dairies    not    issuing    stock    and 
in  "s?ock"and"ai- alio  whig  patrons  dividends  based  on  butter  fat  in  milk 
(iTvidMidsV^ex- furnished  are  not  Uablc.     In  such  case  the  ''dividends" 
^'"'^  ■  are  the  purchase  price  of  the  raw  material  furnish<Ml. 

When   incomo      Art.  93.  Tlic  iucomc  tU'rivcd  from  any  ])ubli('   utility 

from  ijublic  utili-  c  .1  •  r  j*    i  j     1     j- 

ties  is  not  tax- or  troni  tlic  cxercisc  oi  any  essciitial  governmental  lunc- 
tioii,  which  income  accrues  to  any  State,  Territory,  the 
District  of  Columbia,  or  any  political  subdivision  of  a 
State,  Territory,  or  the  District  of  Columbia,  and  any 
uicome  accruing  to  the  government  of  the  Philippine 
Islands,  or  to  Porto  Rico,  shall  not  be  subject  to  the  tax 
miposed  by  this  act.  In  cases  wherein  any  State,  Ter- 
ritory, or  the  District  of  Columbia,  or  any  political  sub- 
division of  a  State,  or  Territory,  shall  have,  prior  to  the 
passage  of  this  act,  contracted  in  good  faith  with  any 
person  or  corporation  to  acquire,  construct,  operate,  or 
maintain  a  public  utihty,  no  income  tax  pursuant  to 
this  act  shall  be  levied  upon  the  income  derived  from 
the  operation  of  such  public  utility,  so  far  as  the  assess- 
ment and  payment  of  such  tax  will  impose  a  loss  or  bur- 
den upon  such  State,  Territory,  District  of  Columbia, 
Persons  or  cor- or  pohtical  subdivision.     But  the  person  or  corporation 

porations  not  ex- .       ^  t  i    r.  p     ^  1 

empt.  IS  not  relieved  from  the  payment  ot  the  tax  upon  tliat 

portion  of  the  income  accruing  to  him,  or  it,  under  sucjti 
contract, 
not^'^taxabie^^as      ^^^'  ^'^'  Ordinary  copartnerships  are  not,  as  such,  sub- 
corporations.       JQQ^  ^Q  ^Yie  tax  imposed  by  this  act,  but  the  individual 
members  of  any  such  partnership  are  liable  for  income 
tax  only  in  their  individual  capacity  on  their  respective 
shares  of  the  earnings  of  such  partnership,  whether  such 
earnings  be  distributed  or  not. 
What    consti-      Art.  95.  Full  amount  of  stock,  as  represented  by  the 

tutes    paid-up  '  ^  iii 

capital  stock.  p^r  valuc  of  tlic  sharcs  issued,  is  to  be  regarded  as  the 
paid-up  capital  stock,  except  when  such  stock  is  assess- 
able on  account  of  deferred  payments,  or  payable  in 
installments,  in  which  case  the  amount  actually  paid  on 
such  shares  will  constitute  the  actual  paid-up  capital 
stock  of  the  corporation. 
Gross   income,      ^rt.  96.  The  followiuor  definitions  and  rules  are  given 

now  determined.  o  ^  o 

for  determining  the  gross  income  of  various  classes  of 
corporations: 


INCOME   TAX   REGULATIONS.  63 

Gross  income  of  banks  and  other  financial  institutions  ba^T^and°Xer 
consists  of  the  total  revenue  derived  from  the  operation  ^^^^^^  institu- 
of  the  business,  including  income,  gains,  or  profits  from 
all  other  sources,  as  shown  by  the  entries  on  the  books  of 
account,  within  the  calendar  or  fiscal  year  for  which  the 
return  is  made. 

Art.  97.  Gross  income  of  insurance  companies  consists  ,.„lf,'L°f^i?^°™® °^ 

*■  inourdriic©  compel" 

of  the  total  revenue  derived  from  the  operation  of  the^iies- 
business,  including  income,  gains,  or  profits  from  all  other 
sources,  as  shown  by  the  entries  on  the  books  of  account 
within  the  calendar  or  fiscal  year  for  which  the  return  is 
made,  except  as  modified  by  the  express  exemptions  of 
the  articles  which  apply  to  mutual  fire,  mutual  marine, 
and  life  insurance  companies. 

Art.  98.  Mutual  fire  insurance  companies,  which  rc-^j^^lfg:^'';^®^"^ 
quire  their  members  to  make  premium  deposits  to  pro- ^'^''® ^"'"p^^^^- 
vide  for  losses  and  expenses,  shall  not  return  as  gross 
income  any  portion  of  the  premium  deposits  returned  to 
their  poUcyholders,  but  shall  return  as  taxable  income 
all  income  received  by  them  from  all  other  sources  plus 
such  portions  of  the  premium  deposits  as  are  retained  by 
the  companies  for  purposes  other  than  the  payment  of 
losses  and  expenses  and  reinsurance  reserves. 

Art.  99.  Mutual  marine  insurance  companies  may  in- iji^^ce  wmiJa.- 
clude  in  their  deductions  from  gross  income  amounts  °^^' 
repaid  to  pohcyholders  on  account  of  premiums  previ- 
ously paid  by  them  and  interest  paid  upon  such  amounts 
between  the  ascertainment  thereof  and  the  payment 
thereof,  such  amounts  and  interest  having  been  included 
in  gross  income. 

Art.  100.  Life  insurance  companies  are  authorized  to 
omit  from  gross  income  such  portion  of  any  actual  pre- 
mium received  from  any  individual  policyholder  as  shall 
have  been  paid  back  or  credited  to  the  poUcyholder  or 
treated  as  an  abatement  of  his  premium.  In  so  far  as 
"deferred  dividends"  payable  at  a  stated  period  repre-dends deductible, 
sent  "a  portion  of  any  actual  premium  received,"  such 
deferred  dividends  may  be  included  in  the  amounts  to  be 
omitted  from  gross  income  for  the  year  in  which  they 
were  actually  paid  back,  credited  to  the  poUcyholder,  or 
applied  as  an  abatement  of  premium.  In  the  case  of 
dividends  credited  or  apportioned  annually  to  the  policy- 
holder, only  the  aggregate  amount  so  actually  credited 
or  apportioned  during  the  premium-paying  period,  and 
not  any  accretions  thereto,  can  be  excluded  from  gross 


64  INCOME    TAX    BEGULATIONS. 

income.  Jn  tlic  caso  of  whole-life  or  iive-year  distribu- 
tion polieies,  deferred  dividends  may  be  excluded  from 
gross  income  to  the  extent  that  they  are  paid  back,  or 
credited  to  the  insured,  or  used  as  an  abatement  of  his 
annual  premiums. 
';„f?,?o^i?^°?,?,^'  Art.  101.  Gross  income  of  insurance  companies,  as 
fXar'^""^"'"^^^^^'^^*^^'^^  above,  will  include  net  premium  income  as 
reported  to  the  State  insurance  departments,  except  the 
foregoing  items  specifically  exempted  in  the  act,  and,  in 
the  case  of  life  insurance  C()nij)anies,  surrender  values 
ai)i)lied  in  any  manner,  consideration  for  supi)lementary 
contracts  involving  and  not  invohang  life  contingencies, 
and  all  otlier  income,  gains,  or  profit  as  shown  by  the 
books  of  account, 
fof  °^upp!emeu°  Art.  102.  Ap])lied  surrender  values  and  consideration 
tary  contracts.  ^^^^,  sypplonientary  contracts  not  involving  life  contin- 
gencies included  in  income  will,  of  course,  be  deducted  as 
])ayments  under  policy  contracts,  but  for  convenience  in 
verifying  the  returns,  these  items  should  appear  in  the 
return  in  both  gross  income  and  deductions, 
statemenrto  Ic-  Art.  103.  All  insurance  companies  should  include  and 
comp  yre  "attach  to  their  returns  a  supplementary  statement  show- 
ing, for  life  companies,  the  aggregate  of  items  "of  such 
portion  of  any  actual  premiinn  received  from  any  indi- 
vidual policyholder  as  shall  Iiave  been  paid  back  or  cred- 
ited to  such  individual  policyholder,  or  treated  as  an 
abatement  of  premium  of  such  individual  policyholder 
within  such  year;"  in  the  case  of  mutual  fire  insurance 
companies  a  statement  showing  "any  portion  of  the  pre- 
mium deposits  returned  to  their  policyholders;"  and  in 
the  case  of  mutual  marine  companies  "amounts  repaid 
to  policyholders  on  account  of  premiums  previously  paid 
by  them,  and  interest  paid  upon  such  amounts  between 
the  ascertainment  thereof  and  the  payment  thereof," 
which  are,  or  may  be,  omitted  from  gross  income.  (For 
authorized  deductions,  on  account  of  losses,  etc.,  see 
Arts.  113  and  147.) 
Gross  income  of     Art.   104.  Gross  incomc  of  manufacturing  companies 

m  a  n  u  f  a  cturing  °  ^ 

companies.  .  shall  consist  of  the  total  sales  of  manufactured  goods 
during  the  year  covered  by  the  return,  increased  or  de- 
creased by  the  gain  or  loss  as  shown  by  the  inventories 
of  finislied  and  unfinished  products,  raw  material,  etc., 
at  the  beginning  and  end  of  the  year.  To  this  amount 
should  be  added  tlie  income,  gains,  or  profits  from  all 
other  sources  as  shown  by  the  books  of  account. 


INCOME    TAX   EEGULATIONS.  65 

Art  105.  Gross  income  of  mercantile  companies  shall  iii^r^ntire*^corpo^ 
include  the  total  merchandise  sales  during  the  year,  in- rations. 
creased  or  decreased  by  the  gain  or  loss  as  shown  by 
the  inventories  of  merchandise  at  the  beginning  and  end 
of  the  year  for  which  the  return  is  made ;  to  this  amount 
should  be  added  the  income,  gains,  or  profits  derived 
from  all  other  sources  as  shown  by  the  books  of  account. 

Art.  106.  Gross  income  of  miscellaneous  coi-j^orations m^cefun°eo1is 
consists  of  the  total  revenue  derived  from  the  operation  ^°°^p^^^^- 
and  management  of  the  business  and  property  of  the 
corporation  making  the  return,  together  Avith  all  amounts 
of  income,  including  the  income,  gains,  or  profits  from  aU 
other  sources  as  shown  by  the  books  of  account. 

Art.  107.  It  will  be  noted  from  these  definitions  that    Deflnitionof 

-  ,  .        gross  income. 

the  gross  mcome  embraces  not  only  the  operating 
revenues,  but  also  income,  gains,  or  profits  from  all 
other  sources,  such  as  rentals,  ro3'alties,  interest,  and 
dividends  from  stock  owned  in  other  corporations,  and 
apj)reciation  in  values  of  assets,  if  taken  up  on  the  books 
of  account  as  gain;  also  profits  made  from  the  sale  of 
assets,  investments,  etc. 

Art.  108.  For  the  purpose  of  determining  the  income  f^om'^^^l  of 'cS 
resulting  from  the  sale  of  capital  assets  and  the  amount  *^^^^^®^®- 
to  be  accounted  for  as  income  under  this  act,  there  shall 
be  included  an}'  and  all  profit  resulting  from  such  sale 
and  which  may  be  apportioned  to  the  period  during 
which  the  corporation  tax  law  (sec.  38,  act  of  Aug.  5, 
1909)  was  in  force  and  effect,  which  was  not  returned  as 
income  during  that  period. 

Art.  109.  In  ascertaining  net  income  derived  from  the  ^g^^g^^^^g^ji^J 
sale  of  capital  assets,  if  such  assets  were  acquu*ed  sub- ^^^^'^  °^ capital 
sequent  to  January  1,  1909,  the  difference  between  the 
selHng  price  and  the  buying  price  shall  constitute  an 
item  to  be  added  to  or  subtracted  from  gi'oss  income  ac- 
cordmg  to  whether  the  selling  price  was  greater  or  less 
than  the  bujdng  price.  If  the  capital  assets  were  ac- 
quired prior  to  January  1,  1909,  the  amount  of  profit  or 
loss  representing  the  difference  between  the  selling  and 
bu3dng  price  is  to  be  prorated  to  determine  the  proi:)or- 
tion  of  the  gain  or  loss  arising  subsequent  to  January  1, 
1909,  and  the  proportionate  part  belonging  to  tlio  j^ears 
subsequent  to  January  1,  1909,  shall  be  added  to  or  de- 
ducted from  the  gross  income  for  the  year  in  which  the 
sale  was  made. 

24785°— 14 5 


66  INCOME    TAX   EEGULATIONS. 

Profit  or  loss      ^j.^    110.  FuT  1  lio  puri)<)sc  of  dotcrmininf'  the  i)r<)iii  or 

arising   from   tlie  i  p  i  i      n    u 

sale 01  sudi assets. i,)j;^  tuisiiig  from  tlio  salo  of  such  assets,  there  si i all  be 
added  to  the  price  actually  realized  from  the  sale  any 
amount  which  Jias  heretofore  been  set  aside  and  de- 
ducted from  gross  income  by  way  of  depreciation  since 
January  1,  1909,  which  has  not  been  paid  out  in  making 
good  such  depreciation  on  the  propert}'  sold. 
iM^k  viUue^ofL"  Art.  ill.  In  the  case  of  changes  in  book  values  of 
^«^-  capital  assets  resulting  from  a  reappraisal  of  prop(^rty, 

the  consequent  gains  or  losses  shall  be  computed  for  the 
return  in  the  manner  prescribed  above  in  the  case  of   the 
sale  of  capital  assets 
Rosuu  of  an-      j^  casGS  wherain  there  is   an   annual   adjustment  of 

rnal    arljiistmeiit;  _  i     ti 

of  values  to  be ]jQok  valu^s   of  secuiitics,   real   estate   and    like   assets, 

shown  iu  rotuni.  '  .  •      i  • 

and  the  increases  and  decreases  m  values,  thus  indi- 
cated, are  taken  up  on  the  books  and  reflect  2d  in  the 
profit  and  loss  account,  such  readjusted  values  will  be 
taken  into  ac-count  in  making  the  return  <»f  annual  net 
income  and  no  prorating  will  be  required.  If  such 
adjustment  had  been  made  annually  prior  to  March  1, 
191.3,  the  book  value  of  the  assets  at  that  date  will  be 
taken  as  the  basis  for  determining  gain  or  loss  resulting 
from  subsequent  sale,  maturit}',  or  adjustment.  The 
adjustment  referred  to  will  comprehend  assets  v.'hich 
have  increased  in  value  as  well  as  those  which  have  de- 
creased. 
Where  corpora-      j^^t.  112.  Wlierc  a  cori^oratioii  is  engaged  in  carrving 

tlons  are  engaged  pi-  •  i      "         i 

in  more  than  one  q^  ^loro  thaii  oiic  class  of  busiiiess,  gross  iiicomc  derived 

class  of  busmess.  «  i        •  i     n  i  •        i 

from  the  different  classes  oi  business  shall  be  ascertained 
according  to  the  definitions  above,  and  which  are  appli- 
-  cable  thereto. 

how^Vcmailfed:  Art.  113.  The  net  income  shall  be  ascertained  by  de- 
ducting from  the  gross  amount  of  the  income  of  such 
corporation  received  within  the  year  from  all  sources : 

ne?efs?ry^'expe"n-      First.  All  the  Ordinary  and  necessary  expenses  paid 

ses-  ^vithin  the  year  m  the  maintenance  and  operation  of 

its  business  and  properties,  including  rentals  or  other 
payments  required  to  be  made  as  a  condition  to  the  con- 
tinued use  or  possession  of  property. 

wuhi^  the  jxar."^  Sccoud.  All  losscs  actually  sustained  within  the  year 
and  not  compensated  by  insurance  or  otherwise,  includ- 
Depreciation.  j^g  ^  reasonable  allowance  for  depreciation  by  use,  wear 
and  tear  of  property,  if  any,  and  in  the  case  of  mines,  a 
reasonable  allowance  for  depletion  of  ores  and  all  natural 
deposits,  not  to  exceed  5  per  centum  of  the  gross  value 


INCOME    TAX    KEGULATIONS.  67 

at  llio  mine  of  Hit'  output  for  tli<^  yrar  for  which  the  com- 
putation is  made;  and  in  the  case  of  insurance  companies, 
the  not  acklition,  if  any,  required  by  law  to  bo  made 
within  the  yetir  to  reserve  funds,  and  the  sums  other  than 
dividends  paid  within  the  year  on  policy  and  annuity 
contracts,  except  as  provided  in  the  cases  of  mutual  fire, 
mutual  marine,  and  life  insurance  companies. 

Third.  The  amount  of  interest  accrued  and  paid  ^^thin^,rTO^'^^^ud%(^l 
the  year  on  its  indebtedness  to  an  amount  of  such  indebt-"''^"^^'^^^'^^'^- 
edness  not  exceeding  one-half  of  the  sum  of  its  interest- 
bearing  mdebtedness  and  its  paid-up  capital  stock  out- 
standing at  the  close  of  the  year,  or  if  no  capital  stock,  on 
the  amount  of  its  indebtedness  not  exceeding  the  amount 
of  capital  employed  in  the  business  at  the  close  of  the 
year:  Provided,  That  in  case  of  indebtedness  wholly  se-    interest  on  in- 
cured  by  collateral  the  subject  of  sale  in  ordinary  business  cured  by  coiiat- 

»  ,  ...  1  •       •  era!. 

of  such  corporation,  jomt-stock  company,  or  association, 
the  total  uiterest  secured  and  paid  by  such  company,  cor- 
poration, or  association  within  the  year  on  any  such  in- 
debtedness may  be  deducted  as  a  part  of  its  expense  of 
doing   business:  Provided   further.  That   in    tho   case    of    Tax   paid   on 

.  .        *'na.rtir»tG6d  bonds 

bonds  or  other  indebtedness,  which  have  been  issued  with  Sot  deductible. 
a  guaranty  that  the  interest  payable  thereon  shall  be  free 
from  taxation,  no  deduction  for  the  payment  of  the  tax 
herein  imposed  shall  be  allowed;  and  in  the  case  of  a  bank, 
banking  association,  loan,  or  trust  company,  interest 
paid  wathin  the  year  on  deposits  or  on  moneys  received 
for  investment  and  secm-ed  by  interest-bearing  certifi- 
cates of  indebtedness  issued  by  such  bank,  banking  asso- 
ciation, loan,  or  trust  company. 

Fourth.  All  sums  paid  within  the  year  for  taxes  im-    T.^^res    P^iJ 

i       _  y  wiiliin  the  year. 

posed  under  the  authorit}^  of  the  United  States,  or  an^' 
State  or  Territory  thereof,  or  imposed  by  the  government 

of  any  foreign  country. 

Art.  114.  Expenses  of  operation  and  maintenance  shall pg^nerai  ex- 
include  all  expenditures  for  material,  labor,  fuel,  and  other 
items  entering  into  the  cost  of  the  goods  sold  or  inven- 
toried at  tlie  end  of  the  year,  and  all  other  expenses 
incurred  in  the  operation  of  the  business  except  such  as 
are  r(H|uh'ed  by  the  act  to  be  segregated  in  the  return. 

Art.  115.  The   cost   of    erectuig  permanent   buildings  j^igg^^'oif  ic^e'd 
on  gi'ound  leased  by  a  company  is  a  proper  deduction  as  ^°^"  ^' 
a  rental  charge,  provided  sucJi  buildhigs  are  left  on  the 
grouiid  at  the  expiration  of  tin;  lease  as  a  part  of  the 
rental  payment.     In  such  case  the  cost  will  be  prorated 


68  INCOME    TAX   EEGULATIONS. 

according  to  the  jiuin'oor  of  3^oar.s  constitiiting  the  Unm 
of   tlio   loaso   and   the    annual   deduction  will  bo   made 
accordingly. 
Expense,    for-     Art.  116.  General  expenses,  such  as  coal,  ship  stores, 

eign      steamship  ,.  p         •  ,  i  •  •  i     n  i  ±    j 

compaiuns.         ( tc,  <»1  loroigu  steamsiup  companies,  shall  bo  prorated  as 
])ro Added  in  the  act  for  interest  deductions  in  tlie  case  of 
foreign  corporations. 
Commissions  to      Art.  117.  Commissions  allowed  Salesmen,  paid  in  stock, 

salesmou  paid  m  _  _  '  -i  ' 

stock.  ma}'  be  deducted  as  expense  if  so  charged  on  books  at  the 

actual  value  of  such  stock. 

Additions  and      Alt.  118.  Amounts  oxpcndod  in  additions  and  better- 
betterments.  .  ^     .  ,  •     1  • 

ments  which  constitute  an  increase  m  caj^ital  investment 

are  not  a  ])roper  deduction, 
b^ed'^o^n^stock-     Art.   119.  Amouuts    paid    as    compensation    or    addi- 
duciibfe.'^"'^  '^^'tional    compensation    to    officers    or    employees,    which 
amounts  are  based  upon  the  stockholdings  of  such  officers 
or  employees,   are  held  to  be  dividends,   and  although 
paid  in  lieu  of  salaries  or  wages,  are  not  allowable  deduc- 
tions from  gross  income,  for  the  reason  that  dividends 
are  not  deductible. 
or^^atuitfes'°not     ■^^^*  ^^^'  ^^^^ounts  paid  for  pensions  to  retired  emi)loy- 
deductibio.         q^s,  or  to  their  families,  or  others  dependent  upon  them, 
or  on   account   of   injuries   received   by   employees,    are 
proper  deductions  as  ''ordinary  and  necessary  expenses"; 
gifts  or  gratuities  to  employees  in  the  service  of  a  corpora- 
tion   are    not    ])ropci-ly    dedLicti])le   in    ascertaining   net 
income. 
Donations      Art.  121,  Donations  made  for  purposes  connected  v/ith 

which  are  deduct-  ^       t  _      _ 

i^'e.  the  operation  of  the  property  wdien  limited  to  charitable 

institutions,  hospitals,  or  educational  institutions,  con- 
ducted for  the  benefit  of  its  employees,  or  theu'  depend- 
ents, shall  be  a  proper  deduction  for  ordinary  and  nec- 
essary expenses. 
Reserves    for      Alt.  122.  Fuuds  sot  asido  by  a  Corporation  for  insuring 

insurance.  .  i     i         •  i  i 

its  own  j^roperty  are  not  a  proper  deduction,  but  an}^  loss 
actuall}^  sustained   and  cliarged   to  such  fund  may  be 
deducted. 
Materials  and      Art.  123.  Ill   ascertaining   expenses  proper  to   be  in- 

SUDDllGS  cj  X  J.  X 

eluded  in  the  deductions  to  be  made  under  the  item  of 
"Expenses,"  corporations  carrying  materials  and  sup- 
pUes  on  hand  for  use  should  include  in  such  expenses  the 
charges  for  materials  and  supplies  only  to  the  amount 
that  the  same  are  actually  disbursed  and  used  in  opera- 
tion and  maintenance  during  the  year  for  wliich  the  return 
is  made. 


INCOME    TAX    REGULATIONS.  69 

Art.  124.  The  deduction  for  losses  must  be  losses  ac-  talked  during'to^e 
tually  sustained  during  tlie  year  and  not  compensated  by  ^«'^^- 
insurance  or  other^vise.  It  must  be  based  upon  the  dif- 
ference between  the  cost  value  and  salvage  A'alue  of 
property  or  assets,  including  in  the  latter  value  such 
amount,  if  any,  as  has,  in  the  current  or  previous  yeare, 
been  set  aside  and  deducted  from  gi-oss  income  by  way  of 
depreciation,  as  elsewhere  defined,  and  has  not  been  paid 
out  in  making  good  such  depreciation. 

Art.  125.  Bad  debts,  if  so  charged  off  the  company's  yj^arg^^oc.*^^^*^ 
books,    durmg   the    year,    are   proper    deductions.     But 
such  debts,  if  subsequently  collected,  must  be  treated  as 
income. 

Art.    126.  Reserves    to    take    care    of    anticipated    or    Reserves    not 
probable  losses  are  not  a  proper  deduction  from  gross  in- 
come. 

Art.  127.  Loss  due  to  voluntary  removal  of  Iniildrngs,  j^^^^lf 'l^^^^/^^jf^: 
etc.,  incident  to  improvements  is  either  a  proper  charge  *°ss- 
to  the  cost  of  new  additions  or  to  depreciation  already 
provided,  as  the  facts  may  indicate,  but  in  no  case  is  it  a 
proper  deduction  in  determmmg  net  income,  except  as  it 
may  be  reflected  in  the  reasonable  amount  allowable  as  a 
deduction  for  depreciation  of  the  new  buildmg.  An}^ 
loss  claimed  because  of  the  voluntary  removal  of  a  build- 
mg is  presumed  to  have  been  covered  by  previous  depre- 
ciation charges;  otherwise  the  amount  of  such  loss  mil 
constitute  a  part  of  the  cost  of  the  new  building. 

Art.  128.  AH  losses  claimed  arising  from  sale  of  capital    Losses  from  sale 

^  .  .     01  capital  assets. 

assets  should  be  arrived  at  in  the  manner  prescribed  in 
article  109,  definmg  gains  arising  from  sale  of  capital 
assets. 

Art.  129.  The  deduction  for  depreciation  should  be  the  ^D^^:^re elation 
estimated  amount  of  the  loss,  accrued  during  the  year  to 
which  the  return  relates,  in  the  value  of  the  property  in 
respect  of  which  such  deduction  is  claimed,  that  arises 
from  exhaustion,  wear  and  tear,  or  obsolescence  out  of  the 
uses  to  Vv^hich  the  property  is  put,  and  which  loss  has  not 
been  made  good  by  payments  for  ordinary  maintenance 
and  repairs  deducted  under  the  heading  of  expenses  of 
maintenance  and  operation.  This  estimate  should  be  j^^^^^.'^l'/tlrmS 
formed  upon  the  assumed  life  of  the  property,  its  cost,  and 
its  use.  Expenses  paid  in  an}'  one  year  in  making 
good  exhaustion,  wear  and  tear,  or  obsolescence  in 
respect  of  which  any  (k'duction  for  depreciation  is 
claimed  must  not  be  inclu(kMl  in  the  deduction  for  ex- 


70 


INCOME    TAX    EEGULATIONS. 


Pep  r  ooiation 
doJuctible,  how 
treated. 


Incidental 
pairs. 


re- 


Deprecialicn 
reserve. 


"iJiverslon  of  do- 
precialion  resorve 


Shrinkage    iii 
book  vahies. 


[)rji.so  vi  iiuiiiik'naufo  uiul  o|)<-'raliuji  of  [\iv  \)io[)vY[y,  but 
must  be  made  out  of  accumulated  allowances,  deducted 
for  depreciation  in  cuiTent  and  previous  years. 

Art.  130.  The  depreciation  allowance,  to  be  deductible, 
must  be,  as  nearly  as  possil)le,  the  measure  of  the  loss  duo 
to  wear  and  tear,  exhaustion,  and  obsolescence,  and 
shotdd  be  so  entered  on  the  books  as  to  constitute  a  lia- 
bility against  the  assets  of  the  company,  and  must  be  re- 
ileclod  in  the  annual  })alance  sheet  of  the  company.  Tho 
annual  allowance  deductible  on  this  account  should  bo 
such  an  amount  as  that  the  ag<^regate  of  the  annual 
allowances  deducted  (hiring  the  life  of  the  propert}',  with 
respect  to  whicli  it  is  claimed,  will  not,  when  the  property 
is  worn  out,  exhausted,  or  obsolete,  exceed  its  original 
cost. 

Art.  131.  Incidental  repairs  wliich  neither  add  to  the 
value  of  the  })roperty  nor  a])preciably  prolong  its  life, 
but  keep  it  in  an  oj)erating  condition,  may  bo  deducted 
as  expenses. 

Art.  132.  Dej)reciation  set  up  on  the  books  and  de- 
ducted from  gross  mcome  can  not  be  used  for  any  pur- 
pose other  than  making  good  the  loss  sustained  by 
reason  of  the  wear  and  tear,  exhaustion,  or  obsolescence 
of  the  ])roperty  with  respect  to  which  it  was  claimed.  If 
it  develops  that  an  amount  has  been  reserved  or  de- 
ducted in  excess  of  the  loss  by  depreciation,  tho  excess 
shall  be  restored  to  mcome  and  so  accounted  for. 

Art.  133.  If  any  portion  of  the  depreciation  set  up  is 
diverted  to  any  purpose  other  than  making  good  the  loss 
sustained  by  reason  of  depreciation,  the  income  account 
for  the  year  in  which  such  diversion  takes  place  must  be 
correspondmgly  increased. 

Art.  134.  Depreciation  in  book  values  of  capital  assets 
shall  be  treated  in  the  return  in  the  manner  prescribed  in 
the  case  of  loss  from  the  sale  of  capital  assets  (art.  109), 
but  amounts  arbitrarilv  charged  off  will  not  be  allowed 
as  deductions  except  so  far  as  they  represent  an  actual 
shrmkage  in  values  which  may  be  determined  to  have 
taken  place  during  the  year  for  which  the  return  is  made. 

Art.  135.  Where  a  corporation  holds  bonds  which  wxro 
purchased  at  a  rate  above  par  and  said  corporation  shall 
proportionately  reduce  the  value  of  those  bonds  on  its 
books  each  year  so  that  the  book  value  shall  be  the  re- 
demption value  of  the  bonds  w^hcn  such  bonds  become 
due  and  pa^^ablc,  the  return  of  annual  net  income  of  tho 


INCOME    TAX    REGULATIONS.  71 

corporation  holding  such  bonds  may  show  the  deprecia- 
tion on  account  of  amortization  of  such  bonds.     The  re-    Amortization 

.     ,  ,      of  bonds. 

qmrenicnt  is,  however,  that  the  amount  carried  to  the 
amortization  account  each  year  shall  be  equitabh'  pro- 
portioned with  respect  to  the  difference  between  the 
purchase  price  and  the  maturing  value  and  the  number  of 
years  to  elapse  until  the  bonds  become  due  and  payable. 
With  respect  to  bond  issues  where  such  bonds  are  dis- 
posed of  for  a  price  less  than  par  and  are  redeemable  at 
par,  it  is  also  held  that  because  of  the  fact  that  such  bonds 
must  be  redeemed  at  their  face  value,  the  loss  sustained  Loss  to  be  pro- 
by  reason  of  their  sale  for  less  than  their  face  value  may  ^^^^ 
he  prorated  by  the  issumg  corporation  in  accordance 
with  the  life  of  the  bond. 

Art.  136.  "Goodwill"  represents  the  value  attached  to    Goodwill. 
a  business  over  and  above  the  value  of  the  physical  prop- 
erty, and  is  such  an  entirely  intangible  asset  that  no  claim 
for  depreciation  in  connection  therewith  can  be  allowed. 

Art.  137.  An  allowance  for  depreciation  of  patents  \\'ill 
be  made  on  the  following  basis : 

The  deduction  claimed  for  exhaustion  of  the  capital    Depreciation  on 

^  patents. 

assets  as  represented  by  patents  to  be  made  in  the  return 
of  annual  net  income  of  a  corporation  for  any  given  j^ear 
shall  be  one-seventeenth  of  the  actual  cost  of  such 
patents  reduced  to  a  cash  basis.     Wliere  the  patent  has    how    deter- 

i  -I     p  ^         /'^  1  •        mined. 

been  secured  from  the  uovernment  by  a  corporation 
itself,  its  cost  would  be  represented  by  the  various  Gov- 
ernment fees,  cost  of  drawings,  experimental  models, 
attorneys'  fees,  etc.  Where  the  patent  has  been  pur- 
chased by  the  corporation  for  a  cash  consideration,  the 
amount  would  represent  the  cost.  Where  the  corporation 
has  purchased  a  patent  and  made  payment  therefor  in 
stocks  or  other  securities,  the  actual  cash  value  of  such 
stocks  or  other  securities  at  the  time  of  the  purchase  will 
represent  the  cost  of  the  patent  to  the  corporation. 

Art.  138.  With  respect  to  the  depreciation  of  patents,    Deduction    in 

,  „       ,  -1111  ^^^^    of    obsoles- 

one-seventeenth  ot  the  cost  is  allowable  as  a  proper  cence  of  patents. 
deduction  each  year  until  the  cost  of  the  patent  has  been 
returned  to  the  corporation.  Where  the  value  of  a 
patent  has  disappeared  through  obsolescence  or  any  other 
cause  and  the  fact  has  been  established  that  the  patent  is 
valueless,  the  unreturned  cash  investment  remaining  in 
the  patent  may  be  claimed  as  a  total  loss  and  be  deducted 
from  gross  income  in  the  return  of  annual  net  income  for 


72  INCOME    TAX   REGULATIONS. 

the  yrar  (luring  which  tlie  fuels  as  to  obsolescence  or  loss 
shall  be  established,  such  unreturiied  cash  value  to  be 
fixed  in  accordance  with  the  proportion  that  the  number 
of  years  which  the  patent  still  has  to  run  bears  to  the  full 
patent  period  of  17  years. 
Depreciation  of      ^j.^    139,  Coruorations  owninnr  tracts  of  timber  lands 

limber  lauu.  i  '^ 

and  remoA'inj2:  therefrom  and  selling,  or  otherwise  dispos- 
ing;  of  the  timber  will  be  permitted  to  deduct  from  tlieir 
gi-oss  income  on  account  of  depreciation  or  depletion  an 
amount  representing  the  original  cost  of  such  timber,  plus 
any  carrying  charges  that  may  have  been  capitalized  or 
not  deducted  from  income.  The  purpose  of  the  depre- 
ciation or  depletion  (kMluction  is  to  secure  to  the  corpora- 
tion, when  the  timber  has  been  exhausted,  an  aggregate 
amount  which,  plus  the  salvage  value  of  the  land,  will 
equal  the  capital  actually  invested  in  such  timbcM-  and 
land. 

peductions   to      Art.  140.  When  an  amount  sufficient  to  return  this  cap- 
cease,  when.        .,11  11  1  11  •     •        1    1 

ital  has  been  secured  through  annual  depreciation  deduc- 
tions no  further  deductioji  on  this  account  shall  be  al- 
lowed. For  the  purpose  of  increasing  the  deduction  on 
this  account  no  arbitrary  increase  in  values  shall  be  made, 
unless  such  increase  in  value  shall,  be  returned  as  income 
for  the  year  in  which  the  increase  in  value  was  taken  up 
on  the  books. 

Depreciation  of      Art.  141.  The  dcpi'eciation  of  coal,  iron,  oil,  gas,  and 

natural  deposits.  i     1  •  i  1 

all  other  natural  deposits  must  be  based  upon  the  actual 
cost  of  the  properties  containing  such  deposits.  In  no 
case  shall  the  annual  deduction  on  this  account  exceed 
5  per  cent  of  the  gross  value  at  the  mine  (well,  etc.)  of 
the  output  for  the  year  for  which  the  computation  is 
made. 
'Sot'yiduc''  at  Art.  142.  The  term  "gross  value  at  the  mine,"  as  used 
in  paragraphs  B  and  G  of  section  2  of  the  act  of  October 
3,  1913,  prescribing  a  limit  to  the  amount  which  may  be 
deducted  in  the  return  of  individuals  and  corporations 
as  depreciation  in  the  case  of  mines,  is  held  to  mean  the 
market  value  of  ore,  coal,  crude  oil,  and  gas  at  the  mine 
or  well,  where  such  value  is  established  by  actual  sales 
at  the  mine  or  well;  and  in  case  the  market  value  of  the 
product  of  the  mine  or  well  is  established  at  some  place 
other  than  at  the  mine  or  well,  or  on  the  basis  of  the 
bullion  or  metallic  value  of  the  ore,  then  the  gross  value 
at  the  mine  is  held  to  be  the  value  of  the  ore,  coal,  oil, 


the  mine. 


INCOME    TAX   EEGULATIONS.  73 

or  gas  sold;  or  of  tlit;  metal  produced,  loss  transporta- 
tion, reduction,  and  smelting  charges. 
If  the  rate  of  5  per  cent  per  annum  shall  return  to  the.-  ^'}<'^  "^  ^j*^^"^- 

^.         .  ^  tion  to  be  reduced, 

corporation  its  capital  investment  prior  to  the  exhaustion  ^'■'^™- 
of  the  deposits,  the  rate  on  which  the  annual  deduction 
for  depletion  of  deposits  is  based  must  be  lowered  in 
accordance  with  the  estimated  number  of  3'ears  it  will 
take  to  exhaust  the  estimated  reserves. 

In  case  the  reserves  shall  be  in  excess  of  the  estimates,  ceSefwucn"    *" 
no  further  deduction  on  account  of  depletion  shall  be 
made  where  the  ca])ital  investment  has  been  returned  to 
the  corporation. 

Art.  143.  In  addition  to  the  deduction  to  measure  the  Depreciation  of 
loss  due  to  depletion,  the  corporation  will  be  allowed  the 
usual  depreciation  of  its  machuicr}^^^  equipment,  etc., 
such  depreciation  to  be  determined  on  the  basis  of  the 
cost  and  estimated  life  of  the  property  with  respect  to 
which  the  depreciation  is  claimed. 

Art.  144.  Corporations  leasing;  oil  or  gas  teriitorv  shall,  corporatious 

-■■  .  .  °  ^  ./  leasing  oil  or  gas. 

base  their  depletion  deduction  upon  the  cost  of  the  lease, 
and  not  upon  the  estimated  value,  in  place,  of  the  oil 
or  gas. 

Art.  146.  Corporations  operatina;  mines   (includino-  oil    corporations 

^  1  1        •  1  operating   mines. 

or  gas  Avells)  upon  a  royalty  basis  only  can  not  claim 
de])reciation  because  of  the  exhaustion  of  the  dei)Osits. 

Art.  146.  Unearned  increment  will  not  be  considered    I'nearned    in- 
in  fixing  the  value  on  which  de])reciation  shall  be  based. 

Art.  147.   (a)  Under  item  5  (a)  of  the  return  form,  the.  Deduction     of 

'  losses,     dcpreeia- 

insurance  company  may  take  credit  for  all  losses  actually  ^^n,    payments 
i      -J        ■^  _  -^  on    policy   con- 

sustained  durine"  the  year  and  not  compensated  by  in-^'^it^  by  insu- 

,  ...  .  raiuo  companies. 

surance  or  otherwise,  including  losses  resulting  from  the 
sale  or  maturity  of  securities  or  other  assets,  as  well  as 
decreases  by  adjustment  of  book  values  of  securities,  in 
so  far  as  such  decreases  re])resent  actual  declines  in 
values  which  have  taken  place  during  the  year  for  which 
the  return  is  made;  also  losses  from  agency  balances,  or 
other  accounts,  charged  off  as  worthless;  losses  by  defal- 
cation; premium  notes  voided  by  lapse,  when  such  notes 
shall  have  been  included  in  gross  income.  This  item 
will  not,  however,  include  payments  on  policy  contracts. 

(b)  In  this  item  may  be  deducted  actual  losses  sus-    T-osys   i.y 

^    '  -J  _       ,  s  11  r  1  n  k  a  K  p  1  n 

tained  within  the  year  by  reason  of  the  depreciation  ^^^'^^^l^'^  "^  prop- 
property,  which  shall  have  been  so  entered  on  the  books 
of  the  company  as  to  constitute  a  liability  against  its 
assets.     An  arbitrary  dc^preciatioii  deduction  claimed  in 


74  INCOME    TAX    REGULATIONS. 

tlio  rrluin,  but  not  I'vidciiccd  hy  Ixxtk  entry,  cuu  not  bo 
allowed. 

Policy  con-  (<'^  111  ^lii^  itctu  crinlit  will  l)(^  taken  for  all  death,  dis- 
tractapaid.  ability,  or  othr>r  policy  claims,  ineluding  fire,  aceidcnt, 
and  liability  losses,  matured  endo\nnents,  annuities,  pay- 
ments on  installment  policies,  surrender  values,  and  ail 
claims  actually  paid  under  tho  terms  of  policy  contracts. 
Salvage  need  not  bo  included  in  gross  income  if  deducted 
in   .ascertaining   the  net   amount  paid  for  losses  under 

Losses incurro.]  policv  Contracts.     Reserves  covering  liabilities  for  losses 

niuliipaid  not  cie-^  "  •  i  t  i 

ductihif.  incurred,  reported,  resisted,  adjusted  or  unadjusted  but 

not  paid,  can  not  be  deducted  from  gross  income  under 
this  or  any  other  item  of  the  return. 
Additions     to      (d)  Tho  rcscrvB  funds  of  insurance  companies  to  bo 

reserves  required  .,  ,.  .  .  ,,  ...  it- 

by  law,  iiow  de- considered  m  computing  the  deductible  net  addition  to 
reserve  funds  are  held  to  include  only  the  reinsurance  re- 
serve  and  the  reserve  for  supplementary  contracts  required 
by  law  in  the  case  of  life  insurance  companies,  tho  un- 
earned premium  reserves  required  b}^  law  in  the  case  of 
fu'e,  marine,  accident,  liability,  and  other  insurance 
companies,  and  only  such  other  reserves  as  are  sj^ecifically 
required  by  the  statutes  of  a  State  within  which  the  com- 
pany making  the  return  is  doing  business.  The  reserves 
used  in  computing  the  net  addition  must  not  include  the 
reserve  on  any  policies  the  premiums  on  which  have  not 
been  accounted  for  in  gross  income.  For  the  jourpose  of 
this  deduction,  the  net  addition  is  tho  excess  of  the 
reserve  at  the  end  of  the  year  over  that  at  the  beginning 
of  the  yeeir  and  may  be  based  upon  the  highest  authorized 
reserve  required  by  any  State  in  which  the  compai;y 
making  the  return  does  business, 
co^mpan^i^^r"-  ^^'^  ^lio  caso  of  assessmont  insurance  companies,  the 
serves.  actual   deposits  of  sums   with   the   State   or  Territorial 

officers  pursuant  to  law,  as  additions  to  guaranty  or 
reserve  funds,  shall  be  treated  as  payments  required  by  law 
to  reserve  funds. 

Mutual  marine  insurance  companies  will  deduct  under 
item  5(e)  amounts  repaid  to  policyholders  on  account  of 
premiums  previously  paid  by  them  and  interest  joaid  upon 
such  amounts  between  the  ascertainment  thereof  and  tho 
payment  thereof. 
What    consti-     Art.  148.  The  amount  of  interest  accrued    and    paid 

tutes      allowable  -■■ 

iiueresi  dcduc- -^yitj^jj^  (j^q  jquy  hj  a  Corporation  on  an  amount  of  bonded 
or  other  indebtedness  not  in  excess  of  one-liolf  of  the 
sum  of  the  interest-bearing  indebtedness  and  the  j^aid-up 


INCOME    TAX    EEGULATIOlsrS.  75 

capital  stock  outstanding  at  the  close  of  the  year,  or,  if 
no  capital  stock,  on  the  amount  of  interest-bearing 
indebtedness  not  exceeding  the  amount  of  capital  em- 
ployed in  the  business  at  the  close  of  the  year,  consti- 
tutes an  allowable  deduction:  that  is,  the  maximum 
principal,  upon  which  interest  for  the  purpose  of  this 
deduction,  can  be  computed  must  not  exceed,  in  the  one 
case,  one-half  of  the  sum  of  the  interest-bearing  indebted- 
ness and  the  capital  stock  outstanding  at  the  close  of  the 
year,  or,  in  the  other  case,  must  not  exceed  the  amount 
of  capital  employed  in  the  business  at  the  close  of  the 
year.  The  interest  to  be  deductible  must  have  been 
computed  on  the  proper  principal  at  the  contract  rate 
and  must  have  been  actually  paid  within  the  year. 

Interest  paid  pursuant  to  contract  on  an  indebtedness    interest  jiaM  as 

1  !■  _  rental  deductible. 

secured  by  mortgage  on  real  estate  occupied  and  used  by 
a  corporation,  in  which  real  estate  the  corporation  has 
no  equity  or  to  which  it  is  not  taking  title  is  an  allov\'able 
deduction  from  gross  income  as  a  rental  charge,  paj^ment 
of  which  is  required  to  be  made  as  a  condition  to  the 
continued  use  and  possession  of  the  property.     If,  how-jj^Jr"gagron*reTi 
ever,  the  corporation  has  an  equity  in  or  is  purchasing ^^^^^^^^j^jf^j^^''^^'^^^ 
for  its  own  use  the  real  estate  upon  which  such  mortgage  ^,^^fi?;,p"°^   '''^■ 
is  a  prior  lien,  the  indebtedness  will  be  held  to  be  indebt- 
edness of  the  corporation  v.ithin  the  meaning  of  the  law 
and  the  interest  paid  on  such  mortgage  will  be  deductible 
only  to  the  extent  that  it,  Anth  interest  on  other  obliga- 
tions of  the  corpQration,  is  within  the  limit  fixed  by  the 
act. 

Art.  149.  In  the  case  of  banks  and  banking  associa- bankiiig  a^soda- 
tions,  loan  or  triist  companies,  interest  paid  witliin  the  '"'^'" 
year  on  deposits,  or  on  moneys  received  for  investment 
and  secured  by  interest-bearing  certificates  of  indebted- 
ness issued  by  such  bank,  banking  association,  loan  or 
trust  company,  may  be  allowably  deducted  from  the 
gross  income  of  such  corporations. 

Art.  150.  Interest  paid  on  indebtedness,  wholly  secured  i,^i^{;;^^«||^P^^'io° 
by  collateral  the  subject  of  sale  in  ordinary  business  of 
such  corporations,  is  also  deductible  to  the  full  amount 
of  such  interest  paid.  This  contemplates  that  the  entire 
interest  received  on  tlu^  collateral  securing  such  indebted- 
ness shall  be  included  in  tlu^  gross  income  returned. 

Art.  151.  Interest   oji    bonded   or   other   indebtedness  ^fjlj^f^^^t  rates 
bearing  different  rates  of  interest  mav  be  deducted  from 
gross  income  durijig  the  year,  provided  the  aggregate 


We. 


*JQ  INCOME   TAX   REGULATIONS. 

amount  of  aiK-ii  indebtedness  on  which  the  interest  is 
paid  does  not  exceed  the  limit  presciibed  by  hiw,  and  in 
case  the  indebtedness  is  in  excess  of  the  amount  on  which 
interest  may  be  h^gally  deducted  the  indebtedness  bearing 
the  liighest  rate  may  be  fii-st  considered  in  computing  the 
interest  deduction  and  the  bahince,  if  any,  will  be  com- 
puted upon  the  indebtedness  b(ianng  the  next  lower  rate 
actually  paid,  and  so  on  until  interest  on  the  maximum 
princij^al  allowed  has  been  computed. 

Taxes  deducti-  j^^.^^  5^52,  ^11  sums  paid  witliui  the  3'ear  for  taxes  im- 
posed under  the  authority  of  the  United  States  or  of  any 
State  or  Territory  thereof,  or  imposed  by  the  government 
of  any  foreign  country,  are  deductible  from  gross  income. 

Taxes  not  de-     ^j.*^   153^  Taxcs  paid  for  local  benefits  are  not  deducti- 

ductible.  .  ,  ,  ■  .    ,  ,         j. 

ble.     Taxes  paid  by  a  corporatKm  pursuant  to  a  contract 
guaranteeing  that  the  interest  payable  on  its  bonds  or 
other  indebtedness  shall  be  free  from  taxation  are  not 
deductible. 
Tax  on  capital     Alt.   164.  Bauks  paying  taxes  assessed  against  their 
stock  of  >an  ..    g^Q^.j^^^ij^j.^,  jjecause  of  their  ownership  of  the  shares  of 
stock  issued  by  such  banks  can  not  deduct  the  amount  of 
taxes  so  paid  ^n  making  their  return  for  the  income  tax 
imposed  by  this  act  unless  specially  authorized  to  do  so 
by  the  laws  of  the  State  in  wliich  they  do  business.     The 
shares  of  stock  are  the  property  of  the  stocldiolders,  and 
such  holders  are  primarily  liable  for  the  tax. 
Import  duties.       Alt.  155.  Import  duties  or  taxes  are  not  tleductible  un- 
der the  item  of  taxes  paid  during  the  year,  but  should  be 
included  in  arriving  at  the  cost  of  goods  under  item  No. 
4  (expenses). 
Reserves     for     Art.  156.  Rcscrvcs  for  taxes  can  not  be  allow^ed,  as  the 
law  specifically  provides  that  only  such  sums  as  are  paid 
^^-ithin  the  3'ear  for  taxes  shall  be  deducted. 
Foreign  corpo-      Art.  157.  Foreign  corporations  shall  be  subject  to  the 
rations  subject  to  ^^^^^^^^_^j  tax  of  1  per  ccut  computed  upon  the  net  income 
received  by  or  accrumg  to  such  corporations  from  busi- 
ness transacted  and  capital  invested  in  this  country.     For 
the  purpose  of  the  tax  the  net  income  of  such  foreign  or- 
ganizations shall  be  ascertamed  by  deducting  from  the 
gross  income  arismg,  received,  or  accruing  from  business 
done  and  capital  invested  m  this  country  the  deductions 
enumerated  in  the  act,  wliich  deductions  shall  be  hmited 
Deductions  to  expenditures  or  charges  actually  mcurred  in  the  main- 
pens^s'^^of^^busl:  tcnaucc  and  operation  of  the  business  transacted  and  cap- 
un1te1fStates.'''°ital  invested  in  the  United  States  or,  as  to  certain  charges, 


taxes. 


INCOME    TAX    REGULATIONS.  77  i 

such  proportion  of  the  aggregate  charges  as  the  gross  m- 

coine  from  business   done   and  capital  invested  in  the  ; 

United  States  bears  to  the  aggregate  income  within  and  j 

without  the  United  States.     In  other  words,  the  deduc-  i 

tions  from  the  gross  income  of  a  foreign  corporation  doing 

business  in  this  country  sliould,  as  nearly  as  possible,  rep-  ^  i 

resent  the  actual  expenses  and  authorized  charges  incident  | 

to  the  business  done  and  capital  hivested  in  this  country  ■ 

and  must  not  comprehend,  either  directly  or  indirectly,  » 

any  expenditures  or  charges  incurred  in  the  transaction  of 

busmess  or  the  investment  of  capital  without  the  United  i 

States. 

Art.  158.  It  is  immaterial  whether  the  deductions  ex- ^. now      dedvc-  '■ 

tions  shall  be  evi-  | 

cept  for  taxes  and  losses  are  evidenced  by  actual  dis-^ienced.  ; 

bursements  in  cash,  or  whether  evidenced  in  such  other  I 
way  as  to  be  properly  acknowledged  by  the  corporate 

officers  and  so  entered  on  the  books  of  the  corporation  | 

as  to  constitute  a  liability  against  the  assets  of  the  cor-  i 

poration  making  the  return.     Deductions  for  taxes,  how-  : 
ever,  should  be  the  aggregate  of  the  amounts  actually 
paid,   as  shown  on  the  cash  book  of  the  corporation. 
Deductions  for  losses  should  be  confined  to  losses  actually 

sustamed  and  charged  off  during  the  year  and  not  com-  ; 
pensated  by  insurance  or  otherwise.     Except  as  the  same 

may  be  modified  by  the  provisions  of  the  act,  limiting  ; 

certain  deductions  and  authorizing  others,   the  net  in-  ! 

come  as  returned  for  the  purpose  of  the  tax  should  be  the  j 

same  as  that  shown  by  the  books  or  the  annual  balance  j 

sheet.  •                             I 

Art.  159.  The  tax  imposed  upon  the  income  of  cor-  Tax  on  uet  in-                \ 

-i  -c  come  of  corpora-  , 

porations,   whether  domestic   or  foreign,   shall  be  com- twns  for  the  year 
puted  upon  the  net  income,  ascertained  in  the  manner  •       ; 

hereinbefore  indicated,  except  that  for  the  year  ending 
December  31,  1913,  the  income  tax  vnll  be  imposed  upon 
the  net  income  accrued  from  March  1  to  December  31,  j 

both  dates  inclusive,  and  such  amount  of  net  income  is  , 

ascertahied  by  taking  five-sixths  of  the  entire  net  income  ' 

for  said  calendar  year.  i 

Art.  160.  The  special  excise  tax  on  corporations  pi'o- ^^x^ on^'^orpora-  ' 

vided  for  in  the  act  of  August  5,  1909,  is  reaffirmed  and  ^'on^.  j 

made  operative  and  cftective  as  to  the  period  from  Janu-  i 

ary  1  to  February  28,  1913,  both  dates  inclusive,  wliich  j 

said  tax  shall  be  computed  upon  one-sixth  of  the  entire 
net  income  of  said  corporations  for  said  year,  and  the 


78  INCOME    TAX    BEGULATIONS. 

iict  iiRomc  ^hail  l)('  ascHTlaincd  in  acc-ordar.co  willi  the 
provisions  of  the  income-tax  law. 
ses^smem/'"'^ "''  For  tlie  year  1913  it  shall  he  necessary  to  make 
hut  t)ne  return  and  assessment  for  all  taxes  imposed  iu 
the  income-tax  law  upon  corporations,  either  hy  way  of 
income  or  excise,  which  return  and  assessment  shall  be 
made  at  tlie  times  and  in  the  manner  provided  in  section 
2  of  the  act  of  October  3,  1913. 

Xo  specific  ex-        T"'      1         j1  i  i  •  i-  j-  •         n 

emption     allow-      Liider  the  present  law,  no  spocilic  exemption  is  aUow- 

lion.  able,   as  was   the   case    under  the  corporation-tax  hiw; 

hence  the  assessment  will  be  based  upon  the  entire  net 
income  of  the  corporation  arising  or  accruing  to  il  from 
all  sources  during  the  entire  year  for  w^hich  the  ret  inn  is 
made. 
Inventories.  ^j,^    ^q^    j^^  ordcr  that  Certain  classes  of  corporations 

may  arrive  at  their  correct  income,  it  is  iiecessar}'  that 
an  inventory,  or  its  equivalent,  of  materials,  sup]>lies, 
and  merchandise  on  hand  for  use  or  sale  at  the  close  of 
each  calendar  year  shall  be  made  in  order  to  determine 
the  gross  income  or  to  determine  the  expense  of  opera- 
tion. 

^^Physicaiinven-  j^  physical  inventory  is  at  all  times  preferred,  but 
where  a  physical  inventory  is  impossible  and  an  equiva- 
lent inventory  is  equally  accurate,  the  latter  will  be  ac- 
ceptable. 

An  equivalent  inventory  is  an  inventory  of  matf^rials, 
supplies,  and  merchandise  on  hand  taken  from  the  books 
of  the  corporation. 

ciass/s^or^*'"'^''''      -^^t-  1^2-  For  the  purpose  of  this  tax,  corporations  are 
divided  into  five  classes,  as  follows: 
Class  A.  Class  A.   Financial  and  commercial,  including  banks, 

banking  associations,  trust  companies,  guaranty  and 
surety  companies,  title  insurance  companies,  building 
associations  (if  for  ])rofit),  and  insurance  companies,  not 
specifically  exempt. 

Class  B.  Public  service,  such   as   railroad,  steamboat, 
ferryboat,  and  stage-line  companies;   street-railway  com- 
panies;   pipe-line,  gas-light,  and  electric-light  companies; 
express  companies,  telegraph  and  telephone  companies. 
Class c.  Class  C.  Industrial  and  manufact'uring,  such  as  mining, 

oil  and  gas  producing  companies,  lumber  and  coke  com- 
panies; rolling  mills;  foundry  and  machine  shops; 
sawmills;  flour,  woolen,  cotton,  and  other  mills;  manu- 
facturei-s  of  cars,  automobiles,  elevators,  agricultural 
implements,    etc.;     manufacturers   or  refiners   of  sugar, 


Class  B. 


ISrCOME    TAX   EEGULATIOlirS.  79 

molasses,  sirups,  or  oilier  products;  ice  and  refrigerating 
companies;  slaughterhouse,  tannery,  packing,  or  can- 
ning companies;   printing  and  publishing  companies,  etc. 

Class  D:   Mercantile,  including  all  dealers  (not  other-    ciassD. 
wise  classed  as  producers  or  manufacturers)  in  coal,  lum- 
ber, grain,  produce,  and  all  goods,  wares,  and  merclian- 
dise. 

Class  E :   Miscellaneous,  such  as  architects,  contractors,    class  e. 
hotel,   theater,   or  other  companies  or  associations  not 
otherwise  classified. 

Art.  163.  Under  the  authority  conferred  by  this  act,  ^^^^  re.iun. 
forms  of  return  have  been  prescribed,  in  which  the 
various  items  specified  in  the  law  are  to  be  stated. 
Blank  forms  of  this  return  mt.11  be  forwarded  to  collectors 
and  should  be  furnished  to  every  corporation,  not  ex- 
pressly exem.pted,  on  or  before  January  1  of  each  year, 
in  the  case  of  corporations  making  their  returns  for  the 
calendar  year,  or  on  or  before  the  fii^st  day  of  the  next 
fiscal  year  in  the  case  of  corporations  maldng  returns  for 
their  fiscal  year.  Failure  on  the  part  of  any  corporation, 
joint-stock  company,  association,  or  insurance  company 
liajjlc  to  this  tax  to  receive  a  prescribed  blank  form  will 
not  excuse  it  from  making  the  return  required  by  law, 
or  relieve  it  from  any  penalties  for  failure  to  make  the 
return  in  the  prescribed  time.  Corporations  not  supplied 
with  the  proper  forms  for  making  the  return  should  make 
application  therefor  to  the  collector  of  internal  revenue 
in  whose  district  is  located  its  principal  place  of  business 
in  ample  time  to  have  its  return  prepared,  verified,  and 
filed  with  the  collector  on  or  before  the  last  due  date  as 
hereinafter  defined.  Failure  in  this  respect  subjects  it 
not  only  to  50  per  cent  additional  tax,  but  to  the  specific 
penalty  imposed  for  delinquency.  Each  corporation 
should  carefully  prepare  its  return  so  as  to  fidly  and 
clearly  set  fortli  the  data  therein  called  for.  Imi)erfect 
or  incorrect  returns  will  not  be  accepted  as  meeting  the 
requirements  of  the  law. 

Art.  164.  To  any  sum  or  sums  due  and  unpaid  after  posid  by  ?ct.  ™" 
the  date  for  payment  stated  in  the  notice  and  demand 
issued  by  the  collector  there  shaLl  be  added  the  sum  of 
5  per  cent  of  the  amount  so  unpaid,  and  interest  at  the 
rate  of  1  per  cent  per  month.  To  the  amount  assessable 
on  the  basis  of  the  net  income  there  shall  b(?  added  50 
p(»r  C(mt  in  case  of  refusal  or  neglect  of  a  corporation  to 
make  a  return  or  100  per  cent  in  case  of  a  false  or  fraud- 


80  INCOME   TAX   REGULATIONS. 


ulent  return.  For  rd'usal  or  ncgloct  to  make  a  return 
\\ithin  the  prescribed  time,  or  for  a  false  or  fraudulent 
return,  the  cor])oration  so  offending  shall  be  liable  to  a 
specific  penalty  not  exceeding  Si  0,000.  Any  person 
divulging  unlaw-fully  any  information  whatever  disclosed 
by  a  return  shall  be  punished  by  a  fine  not  exceeding 
$1,000,  or  b}'  imprisonment  not  exceeding  one  year,  or 
both. 

Any  person  or  any  officer  of  an}^  corporation  required 
by  law  to  make,  render,  sign,  or  verify  any  return,  who 

Fraudulent  re-mak{>s  any  false  or  fraudulent  return  or  statement  with 
^^^'  intent  to  defeat  or  evade  the  assessment  required  by 

section  2,  act  of  October  3,  1913,  shall  bo  guilty  of  a 
misdemeanor  and  shall  be  fmed  not  exceeding  $2,000  or 
be  imprisoned  not  exceeding  one  year,  or  both,  at  the 
discretion  of  the  court,  with  the  costs  of  prosecution. 

Fiscal   year;      j^^t.  165.  The  Federal  income-tax  law  authorizes  cor- 

how  established. 

poi'ations,  joint-stock  companies,  etc.,  under  certain  con- 
ditions to  make  their  returns  on  the  basis  of  an  estab- 
lished ''fiscal  year"  or  consecutive  12- months  period, 
which  may  be  other  tlian  the  calendar  year. 

Pursuant  to  this  provision  the  following  instructions 
are  issued  for  the  guidance  of  collectors  and  other  inter- 
ested parties: 
da'^^'for  cifskiTo^     "'^^^  Corporation,  joint-stock  company,  or  association, 
must give^at least <^i"  ^^^Y  insurance  company  subject  to  the  tax  imposed 
con^tor°of'''thot>y  this  act  may,  at  its  oi)tion,  have  the  tax  payable  by 
nated  ^°    ''^^^S'it  Computed  upon  the  basis  of  the  net  income  arising  or 
accruing  from  all  sources  during  its  fiscal  year,  provided 
that  it  shall  designate  the  last  day  of  the  montli  selected 
as  the  month  in  whicli  its  fiscal  3^ear  shall  close  as  the 
day  of  the  closing  of  its  fiscal  ^'^ear,  and  shall,  not  less 
than  30  days  prior  to  the  date  upon  which  its  annual 
return  is  to  be  filed  give  notice,  in  wiiting,  to  the  col- 
lector of  internal  revenue  of  the  district  in  which  its 
})rincipal  place  of  business  is  located,  of  the  day  it  has 
thus  (k^signated  as  the  closing  of  sucli  fiscal  year. 
fis-ai'vear'"'^   °^     ^^^'  ^^^'  ^^  pursuancc  of  this  proAdsion,  a  corporation 
or  Hke  organization  subject  to  this  tax  may,  for  example, 
designate  the  30th  day  of  September  as  the  day  for  the 
closing  of  its  fiscal  year,  whereupon  its  return  of  annual 
net  income  shall  be  filed  with  the  collector  of  internal 
revenue  of  the  district  in  which  its  principal  place  of 
business  is  located  not  later  than  60  davs  after  the  close 


INCOME    TAX   EEGTJLATIONS.  81 

of  its  said  proposed  fiscal  year;  that  is  to  say,  on  or  before 
the  29th  day  of  November  next  succeeding. 

The  date  of  the  closing  of  the  fiscal  year  having  been 
designated,  notice  thereof  must  be  given  to  the  collector 
not  less  than  30  days  prior  to  the  last  day  of  such  60-day 
period.  In  the  case  just  instanced  the  notice  must  be 
given  not  later  than  October  29. 

If  such  designation  (September  30,  1913)  had  been 
made  and  notice  given,  as  hereinbefore  indicated,  as  to 
the  closing  of  the  fiscal  year  1913,  the  corporation  would 
be  authorized  to  make  its  return  and  have  the  tax  payable 
by  it  computed  upon  the  basis  of  the  net  income  arising 
or  accruing  to  it  during  the  period  from  January  1  to 
September  30,  1913,  both  dates  inclusive. 

Art.  167.  Collectors  of  internal  revenue  I'eceiving  j^^°^^^tore^™^st 
notices  of  the  selection  and  designation  of  the  "  fiscal  t|^de|iguation  of 
years,"  as  above  indicated,  \\dU  make  record  of  the  same, 
recording,  (a)  the  name  of  the  corporation  or  like  organi- 
zation, (h)  the  date  when  notice  was  given,  (c)  the  day 
designated  for  the  closing  of  the  fiscal  3^ear,  and  (d)  the 
date  when  the  return  under  such  designation  must  be 
filed,  which  must  be,  as  above  stated,  not  later  than  the 
last  day  of  the  GO-day  period  next  following  the  day 
designated  as  the  close  of  the  fi.scal  3'ear. 

Art.  168.  If  it  shall  appear   tJiat   for   the   year    1913    ^^^^^^    ^9\}^^ 

^  ^  '^  was  given  within 

the  notice  was  given  within  the  prescribed  time — that  is,  prescribed  time, 

.  1  (.  1  1  calendar  year  will 

Avithm  30  days  of  the  last  day  of  the  60-day  period — the  govern. 
1913  return  may  be  made  as  of  the  fiscal  year  so  estab- 
lished ;  otherwise  it  will  be  made  on  the  basis  of  the  cal- 
endar year  until  such  time  as  the  designation  shall  be 
duly  made  and  notice  thereof  properly  given. 

Art.  169.  The  designation  and  notice  can  not  be  retro-    Designation 

~  ana    notice    caji 

active;    that  is  to  say,  if  a  corporation  now  designates °°*g  ^^  retroac- 
April  30,  1914,  as  the  date  of  the  closing  of  its  fiscal  year 
and  gives  notice  of  such  designation,  it  would  not  be 
authorized  to  make  a  return  for  the  four  months  ended 
April  30,  1913,  and  then  for  the  fiscal  year  ended  April 

30,  1914,  nor  would  it  be  authorized  to  make  one  return 
covering  the  entire  16  months  ended  April  30,  1914.  In 
the  case  of  such  corporation  the  return  for  the  year 
must  be  made  for  tlie  calendar  year  ended  December 

31,  1913,  and  then,  assuming  that  designation  and  notice 
had  been  properly  made  and  given,  it  may  make  a  return 
for  the  four  months  ended  April  30,  1914,  and  thereafter 

24785°— 14 6 


82  INCOME    TAX    KEGULATIONS. 

the  return  will  bo  made  mi  the  basis  of  tlie  fiscal  3"ear  so 
established. 
Where     fiscal      ^jt.,  170.  In  all  cases  whore  a  fiscal  year  is  not  estab- 

yoar  is  not  prop-  _  •' 

eriy  established, liyll^^fl  as  abovc  prescribed  returns  must  be  made  on  the 

returns  must  be  i  .  ^ 

made  for ciiicndar  basis  of  the  Calendar  year,  in  which  case  such  returns  must 

year.  *'  ' 

be  filed  on  or  before  the  1st  da^'  of  March  next  succeeding 
such  calendar  year.  Such  returns  in  either  case  pro- 
vided must  be  verified  under  oath  or  afhrmation  of  its 
president  or  other  principal  officer,  and  its  treasurer 
or  assistant  treasurer;  tliat  is  to  say,  by  two  different 
persons  acting  in  the  ofiicial  capacity  indicated. 
i^ba"Tm-fec!fi     Art.  171.  If  it  shall  appear  in  any  case  that  returns 


on 


rated'can  nofifo  ^^^^  been  niadc  to  the  collector  on  the  basis  of  a  fiscal 
accepted.  year  not  designated  as  above  indicated,  tho  corporations 

making  such  returns  will  be  advised  that  such  returns 

can  not  be  accepted,  but  must  be  made  to  cover  the 

business  of  the  calendar  year. 
1913 "^ 'mus't  ^  bo     Ai't'  ^'^^'  Kcturns  made  under  this  act  and  pureuant 
forms.  ^^    ^^^^'  ^o  these  instructions  must  be  made  on  the  new  forms 

prescribed  by  this  department. 

The  forms  heretofore  in  use,  under  the  special  excise 

tax  law',  can  not  be  used  for  making  returns  for  either 

the  fiscal  or  calendar  year  1913. 
Extension  not     ^j.^    273.  An  extension  of  time  within  w^hich  a  return 

toexceeu  Jo  days. 

may  be  filed  can  in  no  case  exceed  30  days  from  the  date 
on  which  the  return  is  due  and  can  be  granted  only  upon 
written  appUcation  to  the  collector,  and  in  case  of  sickness 
or  absence  of  an  officer  whose  signature  to  the  return  is 
requu'ed,  such  application  to  be  made  prior  to  the  expi- 
ration of  the  period  for  which  the  extension  is  desired, 
Ketnrns  prop-      Art.  174.  If  a  Tctum  is  made  and  placed  in  the  United 

erly    mailed     m  i  i  i  i  i  •  i      • 

time  to  reach  col- States  mails,  properly  addressed,  and  postage  paid,  in 
to  penalty  under  ample  time,  m  duc  course  of  mails,  to  reach  the  oince  of 

certain  condi-    ,•'-,,  „  i      c  i       i  i 

tions.  the  collector  or  deputy  collector  on  or  before  the  last  due 

date,  no  penalty  \Till  be  held  to  attach  should  the  return 

not  be  actuall}^  received  by  such  officer  until  subsequent 

to  that  date. 

Last  due  date     Art.  175.  *'  Last  due  date,"  as  hereinbefore  used,  is  con- 
defined.  .  . 

strued  to  mean  the  last  day  upon  which  a  return  is  re- 
quired to  be  filed  in  accordance  with  the  provisions  of 
the  law,  or  the  last  day  of  the  period  not  exceeding  30 
days  covered  by  an  extension  of  time  granted  by  the 
collector, 
faKn '^sun'day  ^^^'  ^'^^-  When  the  due  date  as  above  defined  falls 
or  legal  holiday.'  q^  Sunday  or  on  a  legal  holidiiy,  the  last  due  date  will 


INCOME    TAX    EEGULATIOl!fS.  83 

be  held  to  bo  the  day  next  following  sucii  Sunday  or 
legal  holiday  and  the  return  should  be  made  to  the 
collector  not  later  than  such  foUovrmg  day,  or,  if  placed 
in  the  mails,  it  should  be  posted  in  ample  time  to  reach 
the   collector's    office,    under   ordinary   handling   of   the  | 

mails,  on  or  before  the  date  on  which  the  return  is  thus  i 

made  due  in  the  ofFice  of  the  collector.  < 

Art.  177.  All   assessments    against   corporations,    etc.,    Assessment 

,  IT  •11      ^"'^'  payment  of 

makmg  returns  lor  the  calendar  year  are  requu-ed  to  bet^-^es. 

made  and  the  several  corporations,  joint-stock  companios, 

etc.,  notified  of  the  amount  for  which  they  are  liable  on  ' 

or  before  the  1st  of  June  of  each  sucessive  year,  and  said,,/5    calendar  i 

^  '  year. 

assessments  shall  be  paid  on  or  before  the  30th  day  of 
June  of  such  year.     In  the  case  of  corporations  making ji^^^"**'^^^^^^^®^^- 
returns  for  the  fiscal  year,  the  assessments  shall  be  made  i 

and  notice  given  on  or  before  the  expiration  of  90  days 
from  the  date  when  the  returns  were  required  to  be  filed, 
and  the  taxes  assessed  against  such  corporations,  etc., 
shall  be  paid  within  120  days  after  the  date  upon  which 
the  returns  were  required  to  be  filed.  In  case  of  refusal 
or  neglect  by  a  corporation,  etc.,  to  make  a  return,  and 
in  case  of  false  or  fraudulent  return,  the  commissioner,  , 

upon  the  discovery  thereof  witiiin  thi'ee  years  after  such  : 

returns  are  due,  shall  make  a  return  upon  information  j 

obtained  in  the  manner  provided  in  the  act,  and  the 
assessment  made  on  the  basis  of  such  return  shall  be  paid 
immediately  upon  notice  and  demand  given  by  the  col- 
lector. 

Upon  failure  to  pay  the  tax  when  due  and  for  10  days  ^^^^^^'^^^  ^^^^P^y  ; 

after  notice  and  demand,  a  penalty  of  5  per  cent  of  the  | 

amount  of  the  tax  unpaid  and  interest  at  the  rate  of  1  ! 

per  cent  per  m^onth  until  paid  shall  be   added  to  the  ' 

amount  of  such  tax.  ! 

Art.  178.  When  the  assessments  shaU  have  been  made,  pJ^i^®f-™^recoids!  ' 

the  returns  shall  be  filed  m  the  ofBce  of  the  commissioner  tk,u^upo°n'o?der 
and  shall  constitute  public  records,  subject  to  inspection"^  *^®^'''*''*^'*^"'- 
upon  the  order  of  the  President,  under  rules  and  regula- 
tions prescribed  by  the  Secretary  of  the  Treasury  and 
approved  by  the  President.  Copies  of  returns  on  file  in 
the  Commissioner's  office  are  not  permitted  to  be  sent  to 
any  person,  except  to  the  corporation  itself  or  to  its  duly 
authorized  attorney. 

Art.  179.  Upon  request   of   the   governor   of  a   State  ^^^»f™|^°"j/„« 
whicii  imposes  a  general  income  tax,  the  ]n'oper  officers  oi^.°^^^    income  ^ 

such  State  may  have  access  to  the  returns  filed  by  corpo- 


84  INCOME   TAX   EEGULATIONS. 

rations  doing  business  in  such  States,  or  to  an  abstract 
thereof  sho\^dng  the  name  and  income  of  such  corpora- 
tions, etc.,  at  such  times  and  in  such  manner  as  the  Secre- 
tar}^  may  prescribe.  In  no  case  are  tlie  original  returns 
to  be  removed  from  the  office  of  the  commissioner,  except 
upon  order  and  by  direction  of  the  Secretary  of  the 
Treasury  or  the  President. 

Certified  copies  Art.  180.  At  thc  rcqucst  of  the  Attorney  General,  or  by 
ilirection  of  the  Secretary  of  the  Treasury,  certified  copies 
of  returns  may  be  made  and  deUvered  to  the  United 
States  district  attorneys  for  their  use  as  evidence  in  the 
prosecution  or  defense  of  suits  in  which  the  collection  or 
legality  of  the  tax  assessed  on  thc  basis  of  such  returns  is 
involved,  or  in  any  suit  to  which  the  United  States  Gov- 
ernment and  the  corporation,  etc.,  makmg  thc  return  are 
parties  and  in  which  suit  such  certified  copies  would  con- 
stitute material  oAddence. 

Peuaityforgiv-  Art.  181.  The  disclosure  by  any  collector,  deputy  col- 
in  regard  to  ro- lector,  agont,  clcrk,  or  other  officer  or  employee  of  the 
United  States  to  any  person  of  any  information  whatever 
contamed  in  or  set  forth  by  any  return  of  annual  net 
income  made  pursuant  to  this  act  is,  by  the  act,  made  a 
misdemeanor,  and  is  punishable  by  a  fine  not  exceeding 
$1,000,  or  by  imprisonment  not  exceedmg  one  year,  or 
both,  at  the  discretion  of  the  court,  and  if  the  oflender 
is  an  officer  or  employee  of  the  United  States  he  shall  be 
dismissed  and  be  incapable  thereafter  of  holding  any 
office  under  the  United  States  Government. 

Bookkeeping.  Art.  182.  No  particular  system  of  bookkeeping  or  ac- 
countmg  wiU  be  required  by  the  department.  However, 
the  business  transacted  by  corporations  must  be  so 
recorded  that  each  and  every  item  set  forth  in  the  return 
of  annual  net  income  may  be  readily  verified  by  an  exami- 
nation of  the  books  of  account. 

Books   of   ac-     Art.  183.  The  books  of  a  corporation  are  assumed  to 

count  best  guide       ^  ,        »       ,  .  •  •  tt 

to  income.  reflect  the  facts  as  to  its  eammgs,  mcome,  etc.     lience 

they  will  be  taken  as  the  best  guide  in  determining  the  net 
income  upon  which  the  tax  imposed  by  this  act  is  calcu- 
lated. Except  as  the  same  may  be  modified  by  the  pro- 
visions of  the  law,  wherein  certaui  deductions  are  limited, 
the  net  income  disclosed  by  the  books  and  verified  by  the 
annual  balance  sheet,  or  the  annual  report  to  stockhold- 
ers, should  be  the  same  as  that  returned  for  taxation. 
Omitted  taxos     Art.  184.  In  cases  wherein  corporations  have  neglected 

may  be  assessed.  «         i  i  ,  ^   •  i  •  j. 

or  refused  to  make  returns,  and  m  cases  wherem  returns 


INCOME    TAX   EEGULATIONS.  85 

made  are  found,  upon  investigation  or  otiierwise,  to  be 
false  or  fraudulent,  the  commissioner  may,  upon  discov- 
ery thereof,  at  any  time  witliin  three  years  after  said  re- 
turn is  due,  make  return  upon  the  information  obtained 
in  the  manner  jjrovided  in  the  act,  and  the  tax  so  discov- 
ered to  be  due,  together  with  the  additional  tax  jDre- 
scribed,  shall  be  assessed,  and  the  amount  thereof  shall 
be  paid  immediately  upon  notice  and  demand. 

Art.  185.  Corporations  coming  within  the  terms  of  thiSs^bj^^Pt^^^^j^'^^ 
law  are  subject  to  the  normal  tax  only;  that  is,  a  tax^^^- 
computed  at  a  level  rate  of  1  per  cent  of  their  entire  net 
income  regardless  of  the  amount  of  such  net  income. 

Art.  186.  For  the  purpose  of  verifying  any  return,  ^,^^^^°^^"°'^°^ 
made  pursuant  to  this  act,  the  Commissioner  of  Internal 
Revenue  may,  by  any  duly  authorized  revenue  agent  or 
deputy  collector,  cause  the  books  of  such  corporation  to 
be  examined,  and  if  such  examination  discloses  that  the 
corporation  is  hable  to  tax  in  addition  to  that  previously 
assessed,  or  assessable,  the  same  shall  be  assessed  and 
shall  be  payable  immediately  upon  notice  and  demand. 
For  the  purpose  of  such  examination,  the  books  of  corpo- 
rations shall  be  open  to  the  examining  officer,  or  shall  be 
produced  for  this  purpose  upon  summons  issued  by  any 
l^roperly  authorized  officer. 


PART  4. 

ASSESSMENT  AND  COLLECTION. 

^.l^'f  V^Tn"",!'.'"     Art.  187.  All  income  taxes  found  to  be  due  -will  bo  re- 

reported    on    a.^- 

sessmeni  lists,     ported  by  colloctors  on  their  assessment  lists,  Form  23-A 
in  the  case  of  corporations,  and  on  Form  23-B  in  the 
case  of  individuals  and  withholding  agents. 
Names  to  he     Art.  188.  The  names  of  corporations  subject   to   tax 

beticai  order. " '  ^vi]l  be  listed  on  Form  23-A,  according  to  their  designated 
class,  and  in  alphabetical  order  as  to  each  class.  Names 
of  individuals  subject  to  tax  Avill  be  listed  on  Form  23-B, 
alphabetically,  without  reference  to  class  or  rate  of  tax. 
Following  such  names  there  will  be  listed,  alphabetically, 
Names  of  with- the    namcs    of    all    withholding    or    licensed    collecting 

holdiiiij      asonts,  '^  •    i  i      i  i  i  i 

how  to  be  listed,  agents,  and  the  aggregate  amount  of  tax  withheld  by  each, 
as  shown  by  the  annual  returns  rendered  by  them. 
An  assessment  against  each  person,  firm  or  company, 
from  whose  income  the  tax  has  been  so  withheld,  will  be 
unnecessary  in  such  cases. 
Assessment     Art.  189.  To  avoid,  as  far  as  possible,  the  assessment 

against  witUiold-  i-ii-  p  ,•  ii.- 

ing  agents  to  be  of  taxcs  as  to  wlucli  claims  lor  exem])tion  or  deduction 

deferred  imtil  an-  ,        /^i     i  i  •    i      r^,-.  ^^  -n    t    i  j 

nuai  reports  are  may  DC  filed  uiidcr  articlo  33,  collectors  will  delay  report- 

received.  .  •   -■ 

ing  for  assessment  taxes  remaining  in  the  hands  of  with- 
holding agents,  until  the  annual  reports  of  such  agents, 
which  must  bo  filed  not  later  tlian  March  1  in  each  year, 
are  received. 
to^e*made.'^^''°  Art.  190.  Rctums  of  withholding  agents  (including 
those  of  licensed  collecting  agents)  as  to  interest  payments 
shall  be  made  monthly  and  returns  containing  sum- 
maries of  said  monthly  returns  shall  be  made  annually. 
(See  Part  2,  A,  B,  and  C.)  Returns  of  individuals 
(see  Part  1),  corporations  (see  Part  3),  and  withholding 
agents,  withholding  tax  on  wages,  salaries,  rents,  etc. 
(see  Part  2,  D),  and  fiduciaries  acting  as  withholding 
agents  (see  Part  2,  E)  shall  be  made  annually.  All 
monthly  returns  are  required  to  be  made  on  or  before 
the  20th  day  of  each  month  for  the  preceding  month. 
All  annual  returns  are  required  to  be  made  on  or  before 
the  1st  day  of  March  in  each  year,  except  in  the  case  of 
86 


INCOME    TAX   REGULATIONS.       "  87 

corporations  wliicli  have  given  due  notice  of  the  termi- 
nation of  tlieir  fiscal  year,  in  which  cases  the  prescribed 
return  is  to  be  filed  within  60  days  after  the  termination 
of  such  fiscal  year. 

Art,  191.  Corporations  which  are  subject  to  the  special  ^corp_or^au^oiis 
excise   tax    3n  income  received   during  the   months  of  returns  for  year 

'^  1913  income  sub- 

January  and  February,  1913,  may,  under  the  pro\dsions  j^e«t  to^speciai  ex- 
of  section  4,  paragraph  S,  of  the  act  of  October  3,  1913, 
include  such  income,  as  also  the  income  taxable  under  said 
act,  in  one  return  for  the  year  1913.     In  each  such  case 
one  assessment  only  will  be  made. 

Art.  192.  All  returns  of  income,  whether  of  individuals  coml'^'t"\o^or- 
or  corporations,  should  be  forwarded  with  the  assessment  ^ssmentTi^'S.  '''^' 
list  rendered.     Where  in  any  case  the  collector  has  reason 
to  believe  that  any  return  rendered  is  false  or  fraudulent,  leJt^retons!"*^'" 
he  will  prepare  and  retain  m  his  office  a  copy  of  such 
return,  and  will  note  on  the  original  and  under  the  head 
of  '•Remarks"  of  his  assessment  hst  the  words  "''Investi- 
gation ponding."     lie  will  in  all  such  cases  make  his  inves- 
tigation in  the  manner  prescribed  in  section  3173,  Revised 
Statutes,  and  paragraph  D  of  said  act  of  October  3,  1913; 
and  he  wHl  report  the  results  of  his  investigation  to  the 
Commissioner  of  Internal  Revenue,  referring  to  the  Hst, 
folio,  and  hue  on  which  the  assessment  was  reported. 

Art.  193.  Monthly  and  annual  returns  of  withholding ^^c^rtam^retui^s 
agents  (including  those  of  licensed  agents)  as  to  interest  Ig^'J^ate.  ^"^  "" 
payments  and  the  annual  returns  of  withholding  agents 
withholding  tax  on  wages,  salaries,  etc.,  will  be  made  in 
duplicate,  one  copy  of  wliicli  will  be  retained  by  the  col- 
lector in  his  office  and  one  copy  transmitted  to  the  Com- 
missioner of  Internal  Revenue.  Annual  returns  of  with- 
holding agents  (including  those  of  licensed  agents)  as  to 
interest  payments,  and  returns  of  withholding  agents  as 
to  wages,  salaries,  etc.,  and  of  fiduciaries  will  be  forwarded 
by  the  collector  with  his  list.  Form  23-B,  on  which  the 
tax  withheld  is  reported  for  assessment. 

Art,  194.  All  certificates  of  exemption  or  deductions,  ^j,^^j^tm^°f„^^| 
filed  by  or  on  behalf  of  persons  subject  to  tax,  will  be  f/^^^^f^^'^!"""'' 
forwarded  by  the  collector  as  soon  as  received;  and  all 
such  certificates,  reports,  and  returns,  before  being  trans- 
mitted to  the  commissioner,  will  have  stamped  thereon 
the  name  and  number  of  the  district;  ^viU  be  arranged 
(unfolded)  in  alphabetical  order  and,  in  the  case  of  cor- 
porations, according  to  the  designated  class  to  which  th(>y 
belong.     Care  should  be  taken  to  have  all  such  papers, 


88  ■      INCOME   TAX   BEGULATIONS. 

when  so  arrjiDgcd,  curcfully  secured   by  cord  or   other 
fastening,  so  as  to  insure  their  receipt  in  like  order.     This 
is  especially  necessaiy  in  view  of  the  large  number  of  like 
pa])ers  v\-hich  will  be  forwarded  from  the  various  districts. 
tunwuftfeatoiiTO     ^^t.    195.  In    order    that    assessment    lists    may    be 
foctois?^'^ '^^^°'' pi'^^^^P^'ly  pi'epared   and  forwarded,   collectors   will  see 
that  all  reports  and  returns  to  be  listed  are  examined 
as  received,  and  that  no  delay  occurs  in  this  branch  of 
the  work.     Special  diligence  in  this  matter  is  necessary, 
as  suflicient  time  must  be  given  for  the  reexamination  of 
such  returns  in  the  commissioner's  office  before  assess- 
lisfs^  to' ^bo™pre- ™^^*  i^  made.     The  forwarding  of  assessment  lists,  how- 
wd1;d '^"^tho°u  t  <^^'^^>  sliould  in  uo  casc  be  delayed,   beyond  the  time 
delay.  allowed,    on   account   of   unexamined   returns,    as   such 

returns  can  be  examined  and  reported  on  a  subsequent 
list.  As  the  law  limits  the  time  in  which  these  assess- 
ments are  to  be  made  and  notice  of  assessment  given, 
collectors  v/ill  assign  to  this  work  all  available  force  in 
their  respective  offices. 
Notice   to   bo     j^rt.    196.  Where   the  required  returns   are  not  filed 

sent     to     delin-  t^ 

quents.  within    tlic   prescribed    time,    either    by   individuals    or 

corporations,  notice  on  Form  1045,  should  in  each  case 
be  sent  to  the  dehnquent.  (For  authorized  extension  of 
time,  see  articles  23  and  173.) 

^Notice  of  assess-  ^^t.  197.  When  assessment  has  been  made,  collectors 
will,  on  receipt  of  their  returned  lists,  at  once  issue  pre- 
liminary notices  of  assessment  (Form  647),  and  where 
in  any  case  the  tax  assessed  is  not  paid  on  or  before  the 
30tli  day  of  June,  or  in  case  of  corporations  designating 
their  own  fiscal  year,  within  120  days  following  the  date 
on  which  the  return  should  have  been  filed,  notice  and 
demand  (Form  17)  should  bo  at  once  issued,  and  unless 

tax  ^^^uy,  and  ^^^  ^^^  i^  ^"^^  ^^^0  is  paid  within   10  days  after  the 

interest.  scrvice  of  such  noticc,  general  demand  for  tax,  penalty, 

and  interest  (Form  21)  should  at  once  be  issued.     Imme- 
diate notice  and  demand  (Form  17)  will,  however,  be 
served  in  case  of  failure  to  file  the  required  return  within 
the  statutory  period. 
Notice  of  assess-     ^j-t.  198.  Pending  assessment  on  returns  forwarded  to 

ment  to  be  sent  ^ 

m  onIsI  °"  ^^^^  commissioner,  collectors  will  have  prepared  the  neces- 
sary notices  of  assessment,  with  properly  addressed 
envelopes,  to  be  used  immediately  on  return  of  their 
assessment  lists. 


return 


INCOME    TAX   EEGULATIONS.  89 

Art.  199.  Statements  of  payment,  abatement,  and  out-j^^j^^^y^^l^*^^ 
standincj  balances  of  such  assessed  taxes  will  be  rendered  °"*^*^°^^°g  ^^i- 
monthly    by    collectors    on    special    Form    325.     Such 
statements   will   be   prepared   in   the   same   manner   as 
requu-ed  in  the  case  of  assessments  on  the  regular  Form 
23,  except  that  in  Statement  III   the  outstanding  bal- 
ances on  the  various  Hsts  will  bo  reported  in  aggregate 
only.     Items  constituting  such  balances,  however,  will  balances  *^to*^'be 
be  carded  by  collectors,  but  only  as  to  such  as  wereL^ctoK.    ^  ^°^' 
assessed  during  the  month  for  which  the  return  is  ren- 
dered, thus  avoiding  detailed  statements  each  month  of 
outstanding  balances  previously  reported.     A  separate 
card  (Form  1020)  will  be  used  for  each  such  item;    and 
all  cards  so  prepared  each  month  should  be  arranged 
alphabetically,  and  so  forv/arded  by  the  collector  with 
his  report  on  special  Form  325. 

W.    H.    OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


INDEX. 


Note. — Regulations  are  indexed  l)y  article  nnnilier;  law  indexed  hy  page. 

A. 
Abatement:  Article. 

Claim  for,  of  tax,  mny  be  filed  when,  by  whom 33(; 

Absence: 

From  United  States,  who  may  make  claim  for  deductions  (Form  lOOS) 

for 331> 

Additional  tax: 

Nonresident  alien  subject  to,  computed  same  as  for  citizens  of  United 

States. 8 

Regulations  for 2 

Additions  and  betterments: 

Constituting  iiv:;rease  in  capital  investment  not  deductible  expense  of 

corporation 118 

Adjustment: 

Assessment  of  tax  withheld,  Avitliholding  agent  to  be  notilied 33c 

Administrator  : 

Is  fiduciary  when ■        70 

Make  return  of  income  deceased  person,  when  and  what 17 

Affidavit  : 

Verifying  return  of  income,  before  whom  made 22 

Agent: 

Authorized,  may  sign  for  principal,  certilicate  of  ownership  of  bond. ...  43 

Compensated  on  commission  basis,  income  of,  not  subject  to  withholding 

at  source 32 

Retm-n  made  by,  when 17 

Signing  for   principal,    certificate   of  ownershijj   of  bonds,    to   fiu'ni.sh 

evidence  of  authority  to  act,  when 43 

Ac  rtcultural  org.anizations  : 

Exempt  from  tax p .  12 

Aliens: 

Nonresident — 

Duly  authorized  agent  of,  to  make  return  for  and  j^ay  tax,  when 8 

Income  of,  what  to  be  included  in  return  of 8 

Net  income  of,  defined 8 

Normal  tax  on  entire  net  income  of 8 

Not  allowed  exemption  under  paragraph  C 8 

Not  entitled  to  exemption  under  paragraph  C 3 

Subject  to  additional  tax 8 

Taxable  on  entire  net  income  in  United  States 1 

Tax  on  coupons  or  registered  interest  payable  in  United  States  to  be 

withheld  unless  certificate  of  excmpiion  (Form  1004)  filed 4<) 

Resident — 

Certificate  of  ownership  of  bond,  when  and  how  to  be  used,  and  (o 

specify  what 42 

Income  of,  from  coupon  or  registered  interest,  tax  on  to  be  deducted 

and  withheld  except  to  extent  exemption  claimed 44 

Taxable  on  net  income  less  exemption,  and  deductions 1 

91 


92  IKDEX. 

i 
Amendments:  Aiticlo. 

Sections  31fi7,  3172,  3173.  317(5,  Kov.  Sial j)p.  22-24 

Amortization: 

Doprociatiou  for.  corporation  ullnAvcd,  wlion,  how 135 

Annual  return: 

Form  1013,  to  show  what,  anu  to  be  filed  on  or  before  Mar.  1  each  year. .  50 

Of  coupons  or  interest  orders  not  accompanied  by  certificate  of  ownership 

(form  of),  M-hat  to  phow  when  filed,  totals  only  of  monthly  rot  am 53 

Of  licensee  for  collection  of  foreign  items  (form  of)  what  to  shmv,  with 

whom  filed ,  when 59 

Annuity: 

Money  ])aid  for  (returned)  not  to  l)e  included  in  ^ross  income 5 

Taxabl?,  how  treated 03 

Answer: 

Of  guardian,  etc.,  to  notice  lor  failure  to  make  return,  may  .sliow  what. .  18 

Appeal: 

Decision  of  collector — 

All  papers  of,   to  Commissioner  of  Internal  Revenue;  dissatisfied 

may  submit  case;  furnish  sworn  lestimony  to  proA-e  facts p.  8 

Application  : 
For  license— 

For  collection  foreign  items 55 

•    To  collect  foreign  items  to  be  made  tlirough  principal  ofiice  to  col- 
lector of  district  in  which  located  principal  office 57 

Applied  surrender  values  and  consideration: 
For  supplementary  contracts — 

To  be  both  added  and  deducted  in  return  life  insurance  company. .  102 

Arranc;ement  and  packing: 

Certificates,  reports,  returns,  for  forwarding  by  collector 194 

Assessment: 

Insurance  company,  reserve  of,  definition 147d 

Of  tax  to  be  made  by  Commissioner  of  Internal  Revenue 25 

Against  income  withheld  at  source,  where  to  be  made 38 


"^o" 


Against  withholding  agent 36 

Form  and  notice  of 197 

List  rendered,  collector  to  forward 192 

Amount  of,  when  persons  shall  be  notified ]>p.  8,  9 

Basis  of  calendar  year  or  fiscal  year,  time  to  he  made 177 

I'^ailure  to  pay,  extra  tax  on p.  9 

Limitation  on  time  of  making p.  9 

Made  by  Commissioner  of  Internal  Revenue p.  8 

Of  tax  against  withholding  agent,  deferred  until  agent  makes  return...  189 

Penalty  and  interest  for  nonpayment  of,  exceptions p.  9 

Persons  notified  of  amount  of p.  9 

Y\Tien  to  be  paid p .  9 

Assets,  capital: 
Corporation — 

Change  in  book  Aalue  by  annual  adjustment  ou  books,  that  value  to 

be  iKsed  in  making  annual  returns,  net  income Ill 

Change  in  book  value  by  reappraisal,  gain  or  loss,  how  computed. . .  Ill 

Profit  or  loss  ou  sale  of,  how  determined 110 

Loss  from  sale  of,  how  ascertained 128 

Sale  of  corporation,  net  income  from,  how  determined 109 

Sale  of  l)y  corporation,  income  from,  how  determined 108 

Shrinkage  in  book  value  of  corporation,  how  treated 134 


INDEX.  93 

ASSXDCIATIOX:  Article. 

Charitable,  exemption,  when p.  13 

Making  false  return,  penalty  for p.  12 

Mutual,  domestic  building,  etc p.  13 

Neglecting  to  make  return,  penalty  for p.  12 

Net  income  of,  preceding  calendar  year,  normal  tax  on p.  12 

Operating  under  "Lodge  system, "  defined 89 

Refusing  to  make  return,  penalty  for p.  12 

Religious,  exemption p.  13 

Return  of,  when  available p.  21 

Scientific,  exemption,  when p.  13 

Taxes  to  be  assessed  by  Commissioner  of  Internal  Reven-ue,  when,  section 

3176 p.  24 

To  make  list  or  return  of  taxes,  how,  when ,  section  3173 pp.  22,  23 

Authors: 

Earnings  of,  indelinite  or  irregidar,  not  subject  to  withholding  at  source. .  32 

B. 
Bad  debts: 

Corporation,  ded iictible.  wliea 125 

Collected,  are  income ] 25 

B.\LANCES: 

Outstanding  tax,  liow  treated 199 

Banks: 

Allowing  interest  on  deposits,  not  to  withliold  tax  from G7 

Deductible  status  of  taxes  assessed  against  stockholder,  paid  hy 154 

Interest  paid  on  deposits  allowable  deduction P-  20,  art.  149 

Taking  coupons  for  collection,  originated  or  payable  in  the  United  States, 

duty  of 39 

Mutual  s.vying.s — 

Having  capital  stock  represented  by  shares,  exempt  from  tax y>.  ^2 

Beneficiaries: 

Exemption  from  lax  may  be  claimed  by,  from  fiduciaries 74 

Interest  received  by,  from  insurance  comi:>anics  on  insurance  contract, 

part  of  gross  income 5 

Bequest: 

Of  proper! j'^ — 

Income  from  part  of  gross  income 4 

Value  of,  not  income 4 

BoAKDs-  OF  Trade: 

Exempt,  when p.  13 

Boxd: 

May  ])e  required  of  licensee  for  collection  of  foreign  items 5G 

Bonds,  etc.: 

Of  corporations,  etc. — 

Income  from,  subject  to  withholding  at  source,  regardless  of  amount.  37 

Interest  of  foreign,  subject  to  deduction  and  withholding,  when ]>.  11 

Bond  and  jiohtg.vges: 

Interest  on,  subject  to  deduction,  when p.  10 

Bookkeeping: 

Reciuisites  of,  for  verifying  ret  uru J 82 

Books: 

Of  corporatioji  subject  to  examination,  by  .whom,  for  whaf,  result ISO 


94  INDEX. 

Book  vaiji;: 

Capilal  asaots —  iUticle. 

Chaugc  in.  by  reappraisal,  ^'aiu  or  loss,  liov,-  compuU'il Ill 

Shrinkage  in.  liow  treated 134 

Builoivg: 

Ronlo^•al  of,  corporation,  not  deductible  loss,  wliy 127 

BuiLDIXf;    AND   LOAN    ASSOCIATION'; 

Domeslic,  defined;  wliat  necessary  to  exempt  from  (ax 87 

BrsiNEss: 

Tiawful.  carried  on  for  gain  or  profit :  income  from  part  of  gross  income. .  4 

C. 
Calendar  yeak: 

To  govern  when  notice  of  corporation  fiscal  year  not  gi\'en  in  time 108 

Capital  assets: 

Book  value  of  corporation,  shrinkage  in,  how  treated 13 1 

Corporation — 

Change  in  value  of.  l)y  annual  adjustment  on  books,  that  value  used 

in  making  return  annual  net  income ■  . .  Ill 

Change  in  book  value  by  reappraisal;  gain  or  loss,  how  computed...  Ill 

Loss  from  sale  of,  how  ascertained ]  28 

Profit  or  loss  on  sale  of,  how  determined 110 

Net  income  from  sale  of,  how  determined 109 

Sale  of,  by  corporation,  income  from,  how  determined 108 

Capital  investment: 

Corporation,   increased  by  addllious  and   betterments,   not   dediKtible 

expense 118 

Cemetery  company: 

Taxable  status  depends  on  wliat 90 

Certificate: 

Accompanying  foreign  items,  disposition  of,  by  licensee (i  1 

Claiming  deductions  account  partnership  expense,  what  and  how 47 

Claiming  exemption  and  deductions  to  accompany  annual  return  of 

v*-ithholding  agents G9 

Claiming  exemption  — 

As  nonresident  alien  must  be  illcd  or  tax  Avithhclcl  fmm  juiyment 

coupon  or  registered  interest 40 

From  tax  on  registered  interest  to  be  fUed  at  least  five  days  before 

due  date  of  interest 44 

Of  withholding,  by  foreign  organization,  Form  1018 40 

For  nonresident  alien,  may  be  executed  by  v.'hom 46 

Exemption  or  deduction,  disposition  of 194 

Form  of,  for  foreign  partnersliip  composed  of  nonresident  aliens,  resident 

aliens,  and  citizens  of  United  States 49 

Of  deposit,  interest  on,  part  of  gro.s.s  income 4 

Of  ownership  accompanying  coupons  or  registered  orders,  duty  of  col- 
lecting agency 3D 

Of  ownership — 

By  corporations  organized  in   United  States  claiming  exemption, 

form  of,  and  how  executed 45 

Disposition  of,  by  collecting  agent 40 

Of  persons  not  subject  to  having  tax  vv-ithheld.  disposition  of,  by 

debtors  and  withholding  agent 51 

Not  accompanying  coupons  or  interest  orders,  tax  to  be  withlield  l)y 

first  collecting  agent,  disposition  of  cert  ificale 52 


INDEX.  95 

Certificatjs — Continued. 

Of  ownership — Contiuued. 

Of  bonds—  Article. 

By  citizen  or  resident  of  United  States,  when  and  how  to  be  nsed 

and  to  specify  what 42 

By  corporations  organized  in  United  States  and  certain  exempt, 

must  be  filed  to  prevent  withholding 4o 

May  be  signed  by  authorized  agents 43     _ 

Of  corporations,  etc.,  organized  or  doing  business  in  United 

States,  form  of,  for  foreign  partnership 4S 

Signed  by  agent,  when  verified  by  first  williholJing  agent,  etc.. 

good  in  all  other  hands 43 

Who  to  malvc  and  for  what 39 

Size  of  and  paper  for p.    27 

Substitute  by  collecting  agent,  how  to  l)e  treated  by  di'btors  or  witli- 

holding  agent 51 

That  of  collecting  agent  substituted  when 40 

Certificates,  reports,  returns: 

Arrangement  and  packing  of,  for  forwarding  by  collector i;i4 

Chambers  of  commerce: 

Exempt,  when ]>.  13 

Change  in  hook  value: 

Capital  assets,  corporation,  reappraisal,  gain  or  loss,  how  computed Ill 

Citizen  : 

Income  of,  from  coupon  or  registered  interest,  tax  to  be  withheld  on  ex- 
cept to  extent  exemption  claimed 44 

Of  United  States,  certificate  of  ownership  of  bond,  when  and  how  to  be 

used  and  to  specify  what 42 

Taxable  on  net  income  less  exemption  and  deductions 1 

Civic  leagues: 

Exempt,  when ]>.  13 

Organizations — 

Exempt,  when p .  13 

Claim  : 

For  exemption — 

By  whom,  for  what,  who  to  file 41 

Paragraph  C,  in  connection  with  foreign  item,  allowed  to  person  enti- 
tled to ■ (iO 

Penalty  for  false ]>.  JO 

What  must  shoAV  and  how  executed 42 

When,  and  when  to  be  filed ■. . .        ]  > .  10 

Insurance  company,  amount  actually  paid  undt-r  policy  contract,  consti- 
tute deduction 147c 

Collecting  agency: 

First  receiving  coupons  or  interest  orders  not  accompanied  by  certificates 
of  ownershi})  should  withhold  tax  and  attach  its  certificate,  l'\)rm  1002, 

that  tax  withheld 52 

Agent — 

In  foreign  countries  to  have  privilege  of  substituting  certificates  for 

original  cwnership 40 

Record  to  be  kept  by,  Avhat 40 

Should  require  person  presenting  cou]Ktn  or  interest  orders  to  estab- 
lish identity 52 


96  I^"DEX. 

coLLt;!.  riuN ;                                                          .  AiiKcle. 

Oi  tax  from  wilhholding  agent 36 

Collector: 

AdYiiuced  i)reparation  notice  oi  assessment  by,  i)ar ( ieulars 198 

Arrangement  and  i)acking  certificates,  report'*,  returns 194 

Authority  of,  in  any  district,  section  3173 ]).  24 

Claim  for  deductions  may  be  filed  with,  when 33c 

I)is]>atcli  of  business  in  offices  of 1 95 

Duty  of — 

As  to  returns  withholding  agents 193 

If  persons  refusfi  or  neglect  to  render  return ]).  23 

In  absence  from  home  or  place  of  business !>.  23 

In  case  of  refusal  or  neglect  of  liable  individual  to  make  I'et  urn 21 

In  case  of  undervaluation  or  understatement j).  23 

In  forAvarding— 

Annual  individual  return  to  commissioner 24 

Return  and  assessment  list  and  investigation  of  return 192 

In  making  returns  for  persons  failing  to  do  so p.  23 

Upon  receiving  notice  of  fiscal  year  of  corporation 167 

Faihu'c  to  find  i:>ersou  at  home,  duty  of,  section  3173 P-  23 

Sickness  or  absence,  may  extend  time  for  making  returns,  section  3176..  p.  24 

Legality  of  returns  made  by,  section  3176 P-  24 

Make  return  for  indi\-idual,  when 20 

May  enter  any  collection  district  to  examine  witnesses,  wlien,  section 

3173 p.  24 

Method  of  handling  and  accounting  for  outstanding  tax  balances. ., 199 

Must  require  returns  to  be  verified  by  oatli  or  affirma  tion 22 

Xot  satisfied  with  responsibility,  applicant  for  license  to  collect  foreign 

items,  may  recpiire  bond 56 

Of  what  district,  Form  1008  to  be  filed 33b 

Order  of  arrangement,  names  in  list  made  by 188 

Shall  make  report  of  false  or  fraudulent  returns,  how,  section  317G p.  24 

Shall  require  deputies  to  ascertain  persons  liable  to  tax,  section  3172 p.  22 

Tax  statement  rendered  monthly,  particulars  of 199 

Tax  withheld  to  be  paid  to 34 

To  adjust  in  assessment  in  case  of  withholding,  when 33c 

To  furnish  withholding  agent  with  statement  of  claim  for  deductions 

filed  with  collector 33c 

To  obtain  te8tim<;>ny,  may  summon  whom,  section  3173 p.  24 

To  report  tax  due,  how,  forms  for 187 

To  send  notice  of  what,  form  of  and  time  to  serve 107 

To  send  notice  to  delinquent  and  file  return 190 

To  which,  application  of  principal  oflice  made  for  license  for  branch 

office,  to  serve  collector  in  district  of  branch  with  what 57 

\Vlien  claim  for  deductions,  paragraph  B,  to  Ijo  tiled  witli 33b 

Commissioner  of  Internal  Revenue: 

Annual  return  of  individual  to  be  forwarded  to,  ]iow 24 

Assessments  made  by p.  8 

Facsimile  of  signature  on  licenses  for  collecting  foreign  items  furnished 

collectors 55 

Shall  add  50  per  cent  or  100  per  cent  to  tax,  Avhen p.  24 

Shall  assess  taxes,  when,  section  3176 p.  24 

To  impose  additional  tax,  when P-  9 


INDEX.  97 

Commissioner  op  Internal  Revenue — Continued.  Article. 

To  issue  licenses  fen*  collection  of  foreign  items  through  collectors 54 

To  make  assessment  of  taxes;  give  notice  of,  when;  duty  of  in  case 

neglect  or  refusal  to  make  return  or  of  false  or  fraudulent  return 25 

Commissions: 

Paid  to  salesmen  in  stock  of  corporation,  deductible  expense,  when 117 

Company: 

Foreign,  normal  tax  on  business  transacted  in  United  States ]>.  J 2 

Joint-stock,  etc.,  withholding  normal  tax  on  behalf  of  others p.  9 

Mutual  cemetery,  exempt  when ]).  \i 

Taxes  to  be  assessed  Ijy  commissioner,  when,  section  317G p.  24 

Compensation: 

For  personal  service,  part  of  gross  income 4 

Officers  and  employees  of  State  or  political  subdivision  of,  n(jt  lo  be 

included  in  gross  income 5 

Paid  to  employees  of  corporation  on  basis  of  stockholdings  not  deductible, 

why 1 19 

Present  President  and  judges  of  court  exempt  from  tax,  ^s•hat .5 

Public-school  teachers  of  State  or  political  subdivision  of,  not  ])ait  of 

gross  income 5 

Consideration  for  supplementary  contracts  and  appi.ieu  surrender 
values: 

To  be  both  added  and  deducted  in  return  life  insurance  com]ianies. . . .  102 

Construction  of  law: 

As  to  withholding  at  source,  liberal ]>.  27 

Contract  : 

Affecting  liability  of  a  taxable  ])erson  as  such,  to  be  in\'alid 27 

Copies  of  returns: 

IIow  obtained,  for  what  purpose 178, 180 

Corpor.\tion  : 

Additions  and  betterments  constituting  ino'ease  in  capital  investment 

not  deductible 118 

All  organized  in  United  States  subject  to  tax  (certain  exceptions) 7G 

Amount  allowed  for  depreciation  of  property ]>.  18 

Amounts  paid  emploj'ees — 

As  compensation  on  basis  of  stockholdings  not  deducti])le.  why 1 19 

For  pension  or  on  account  injuries,  deductible  expense 120 

Assessment — 

Insurance  company,  reserve,  definition I47d 

To  be  paid  when ]) .  20 

Bad  debts  deductible,  when 125 

Banks,  etc. — 

Interest  paid  on  deposits,  etc.,  allowable  deduction 149 

Paying  taxes  assessed  against  their-  stockholders,  deductible  status  of.  1 54 

Books  of,  subject  to  examination,  by  whom,  for  what,  result 18(i 

Cemetery,  taxable  status  depends  on  what 90 

Certificates  of  ownership  by  claiming  exemption,  form  of  and  how  exe- 
cuted    45 

Change  in  book  value  of  capital  assets  by  annual  adjustment  on  Ixjoks, 

that  ^alue  to  be  carried  into  return Ill 

Change  in  book  value  of  capital  assets  by  reappraisal,  gain  or  loss,  how 

computed Ill 

Charitable,  exempt,  when ]>.  l^J 

24785—14 7 


98 


INDEX. 


CoRPORATiox— (  ontinucd.  Artid?. 

Classes,  eiiumeiatit>u  of 1(52 

Collector  to  furnish  blanks  for  niurn  of 1G3 

Collect  lug  foreign  income,  to  have  license p.  1 1 

Commissions  to  s;ilesmen  ])aid  in  stock,  deductible  expense  when 117 

Complete  return  to  he  made  by  or  will  not  l)e  accepted iG3 

Contract  wilh  ]>y  State,  etc.,  prior  to  passage  income-lux  a  ■!,  income 

from  accruint^-  to  individual,  suhjet-t  to  tax 93 

ContratJt  with  by  State,  etc.,  j)rior  to  passage  income-tux  act,  iiiconie 

from  accruing  to  State,  etc.,  exempt  from  tax  when 93 

Cost  of  liuildings  on  leased  ground,  deductible  as  rent,  when 1 15 

Daiiues,  cooperative,  not  sul)ject  to  tax,  what 92 

Deductible  loss  defined 124 

Deduction  account  interest  on  indebtedness  limited  to  what,  when 8i 

Deduction- 
Account  materials  and  vsupplies  on  hand,  what 123. 

For  depletion  of  mines  regulation  and  rate  of,  iimii  of 142 

For  depreciation  of  natural  deposits,  basis  and  limit  of Ill 

For  depreciation  on  patent,  what,  how  determined 137 

For  depreciation  on  timberlands,  limit  of,  excess  of,  is  ijicome 140 

For  interest  i)aid  at  different  rates,  rule  of  api)lication 151 

For  obsolescence  of  patents,  what,  how  determined 138 

Defined 78 

Depreciation  tiniberland  fn^ra  removal  of   timl.er.  anioiuil,  liow  deter- 
mined    139 

Depreciation — 

Deductible,  amount,  how  treated 1 30 

Defined 129 

For  amortization  allowed,  when,  how 135 

How  determined 129 

Reserve,  use  of,  disposition  excess  of 132 

Diiasion  of  de2>reciation  of  reserve,  correction 133 

Donation  for  charitable  purposes,  deductible  when 121 

Duties  not  deductible  as  tax  bu  t  item  of  cost 155 

Educational,  exempt,  when p.  13 

Engaged  in  more  than  one  class  of  business,  gross  income  ascertained  iji 

accordance  with  applicable  definitions  of  such  income 112 

Every,  not  specifically  exempt,  required  to  make  return  of  income 80 

Evidence  rec[uisite  for  allowance  of  de<luctions 158 

Excise  and  ijicome  tax  for  1913  iii  one  return 191 

Excise  tax  on,  for  wliat  period,  how  computed IGO 

Exempt  from  tax,  what  are 87 

Expense  of  operatioji  and  maintenance  to  be  shown  in  return p.  18 

Includes  wliat .' 114 

Failure  to  i^eceive  bla,nks  will  not  excuse  from  making  returns,  or  from 

penalties  for  such  failure 163 

Fu-ms,  etc.,  "withholding  normal  Uix  on  tehalf  of  others p.  9 

Fiscal  year  of,  how  established,  what  to  do 1(55 

Illustration  of  and  "what  to  do 106 

Foreign,  normal  lax  on  business  in  United  Stiites p.  12 

Coupons,  checks,  bills  of  exchange,  etc.,  normal  ti>.x  deducted  from, 

when p.  11 

Dividends  on  stocks  of,  normal  tax  deducted  when p.  11 


INDEX.  99 

C'uiU'oiiATiox-   routiiiued. 

Foreign — Continued.  Ariiclc. 
Having  more  than  one  branch  ofllce  in  United  Stales  Vo  tiesignale 

priiicijiul  offiee  and  persoii  to  make  re( uni S'5 

Interest,  on  indebtedness  to  be  deducted,  what p.  20 

To  give  amount  of  bonded  and  other  indebtedness p.  18 

To  set  fortli  paid-up  capital  stock p.  18 

Form  of  return  i)rescribed  for 1 03 

General  expense  foreign  steamship  companies,  how  treated I  !G 

Gifts  or  gral  uities  to  employees  not  deductible 1 20 

Good  will,  depreciatioji  Jiot  allowed  in  connect  ioii  with t:5G 

G  ross  income — 

Definition  of [U] 

General  definition 107 

Gross  value  at  the  mines,  definition  of 112 

In  addition  to  deduction  for  depletion  of  mines,  etc.,  deduction  fur  de- 

preciatio]!  of  plant,  what,  basis  of 14:] 

Income — 

Excepted  during  the  year J5 

From  «ale  of  capital  assets,  how  determined. .-. J08 

How  ascertained p.  ]  4 

Losses  from p.  14 

IXSURAXCE    COMPANY — 

'■  Deductil)le  net  addition  to  reserve,"  definition;  what  basis  of  com- 
putation of;  what  not  to  be  included  in 147d 

Deduction,  claims  actually  paid  under  policy  contract ]47c 

Depreciation  loss  by  shrinkage  in  property  value,  wliat  and  wlioi 

deductible 147b 

Gross  income  of,  definition  of 97,  101 

Losses,  deductions  for,  what 147a 

Reserve  to  meet  losses,  how  treated 147c 

Salvage,  how  to  be  treated  in  retiu'n  of 147c 

Interest  paid — 

As  rental,  how  treated 148 

By,  on  mortgage  on  property  in  which  C(n'p()riition  has  equity  or  is 

purchasing 143 

Deduction,  what,  when 1 48 

On  debts  secured  bj'  collaterfd  subject  to  sale,  deductible,  when,  why.  150 

On  deposits,  etc.,  deductible,  when 113 

Inventory,  purpose  and  use  of;  kinds  of 101 

Leased,  to  m;ike  its  own  return 82 

Leasing  oil  or  gas  temtory,  deductions  for  depletion,  basis  of J 44 

Lessee,  proi)erty  of,  assuming  indeljtedne.ss  of  lessor,  retui'u   by  lessee, 

what 81 

Lessee,  not  to  include  capital  stock  or  debts  of  les.sor  in  return,  excpl. .  82 
liiFE  Insurance  Company — 

Applied    surrender    values    and    consideration    for    suj)p!('nuMifary 

contracts  both  added  and  deduct  ed  in  return 102 

Deducticms  from  gross  income,  what 100 

Gross  income,  definition  of 101 

Supplementary  statement  {Attached  to  return  of,  showing  what 103 

Liquidation  of,  make  final  return  of  wlml ;  fiicil  wIhmi  and  where 85 

' '  Lodge  sysl  em, ' '  defined 89 


100  1^'DEX. 

Corporation     Coutiiiuod. 

l-uss —  Article. 

Actual,  siisUiiiu'd ]).  14 

Sustained  during  year ]>.  IS 

From  removal  of  buildins^s,  not  deductible,  Avhy 127 

From  pale  ol'  capital  assets,  how  ascertained j 28 

Securities  Ijelow  par,  how  treated 135 

Making  false  return,  penalty  for j).  12 

yiay  designate  day  to  pay  tax ]>.  17 

Maiiiifucturiny  company,  gross  income,  definition 104 

Mercantile  company,  gross  income,  definition 105 

Miscellaneous,  gross  income,  definition KX; 

Mutual  companies  milking  return,  definition  of  net  income 80 

Mutual  fire  insurance  company — 

Gross  income,  definition 98 

Supplementary  statement  attached  1o  return.  :<hu\ving,  what 103 

3Iutual  marine  insurance  company — 

Deductions  from  gross  income,  wliat 99 

Supplementary  statement  attached  to  rotin-i\  of.  ,«howino-  what 103 

Will  deduct,  what J  17d 

Neglecting  to  make  return,  penalty  for p.  12 

Net  income — 

Annual,  normal  tax  on j).  12 

Engaged  in  more  than  one  chi.ss  btisiness,  how  ascertained 1 1:', 

For  1913,  how  ascertained 1 59 

Preceding  calendar  year,  normal  tax  on ]  v  12 

Of,  should  be  what 1 58 

Of,  which  is  di.stributab]e  to  owners  thereof;  subject  to  tax 79 

From  all  sources ]  > .  14 

From  sale  of  capital  as.sets,  how  determined 109 

To  be  shown  on  return y.  20 

No  specific  exemption  from  tax IGO 

Notice — 

Given  of  assessments  made ]>.  20 

Of  fiscal  year,  not  retroactive 1()9 

Not  receiving  blank  for  making  return,  should  make  application  for,  to 

whom,  when '. 1  (J?> 

Not  to  include  taxes  paid  in  foreign  countries  in  income;  see  seveniii 

deduction p .  20 

Officers  of,  making  false  relin-n,  penalty p.  12 

Only  one  return  and  assessment  for  1913 KJO 

On  what  ta.xed;  wliat,  and  amount  of ji.  12 

Operating  mines,  oil  or  gas  wells,  on  royalty  ba.sis,  not  allowed,  deduction 

for  depletion  of  de])osits 145 

Oi^erations  of,  etc.,  unlawful  to  divulge.     Section  3107 p.  22 

Organized — 

During  the  year,  to  make  return  of  what 84 

Elsewhere  than  in  United  States,  subject  to  lax  on  Avhat 77 

111  United  States  and  certain  exempt, interest  on  bonds  ]niyal)le  to, 

tax  not  to  be  witliheld  if  certificate  of  ownership  filed 45 

Paid-up  capital  stock,  definition  of 95 

Partnership — 

Limited,  is,  and  subject  to  corporation  tax 86 

Ordinary,  not  subject  to  tax  as 94 


i:ndex.  101 

COKPOKATIOX  — CoUliuUed.  AUide. 

Paymeuts  on  account  of  tax  from  c'o\euaut  in  bonds,   not  dodiuniljle  in 

ascertaining  net  income 113 

reiuilty  for — 
Failure  to 

Make  return p.  20,  Art.  J u;i 

Pay  tax  by  June  30 1^.  20 

Refusal  to  make  return p.  12 

Prolit  or  lo.ss  on  sale,  capital  assets,  how  determined J 10 

FubUc  iitUity,  governmenlal  function,  income  accruing  through,  to  State, 

exempt  from  tax 93 

Railroad  whose  income  paid  by  its  lessee  direct  to  stock  holders  must  make 
retiu-n  of  income SO 


Rd'ujlous,  exempt 2 


•J 


Repairs  may  l)e  deducted,  what 131 

Reseive  for — 

Insurance  of  own  jjroperty  not  deduclibh' 122 

Losses,  not  deductible ]  2G 

Taxes,  not  deductible ] 50 

Return — 

For  1913  must  l)e  on  new  form  and  not  on  excise  form  heretofore  used .  1 72 

To  be  made,  when 1 00 

When  available j).  21 

When  Stale  officers  may  have  access  to p.  21 

When  to  be  made.     Section  3173 p.  22 

Shrinkage  in  \-alue.  capital  assets,  how  ( reated 134 

Special  excise  tax.  how  computed p.  20 

Status  for  taxation  purposes  to  l)e  established,  how 88 

Subject  lo  tax — 

( 'las.ses  enumerated ]>.  12 

Normal  only,  but  on  entire  net  income 185 

Special  exciso,  under  act  August  5,  190(i -  ]i.  2'5 

Taxtible  status  in  donl)t.  must  make  return  and  attach  thereto  statement 

showing  wluil !) I 

Tax- 
Computed  on  net  income  of J59 

Deduct  amount  paid  for p.  20 

Paid  by- 
Constitute  deduction,  when : I.j2 

When  not  deductible 1 53 

To  be  assessed  by  Commissioner  of  Internal  Revenue,  wlien.     Section 

3176 p.  21 

')'o  give  notice,  day  desigiuited  for  return j).  1 7 

Make  list  or  return,  how,  when.     Section  31 73 pp.  22.  23 

Unearned  increment,  not  value  for  depreciation  piu-poses 1Kj 

United  States,  filing  certificates  of  ownership,  exempt  from  withholding 

of  loi-eign  items (ifl 

Wlicn  (o  make  return ]>.  17 

('ost: 

Of  buildings  on  h-ascd  ground,  deductible  as  rent  of  cor])oration,  when. . .  115 


102  INDEX. 

D. 
Da  hues:  AnKle. 

CooporatiAc,  not  suUjocI  lo  lax.  wliat !»2 

Debtor: 

Aumial— 

Ijist  return  by,  wlioii  ami  wlial 50 

Return  by,  to  show  totals  only  of  monthly  liat  return 51 

Definition  of 38 

How  Id  treat  substitute  I'ertifieate  of  collecting  agent  and  certificate  of 

owner  not  subject  to  luiving  tax  withheld 51 

Interest  on  bonds  due,   corporations  organized  hi  Uniteil   States  and 

certain  exempt,  not  to  withhold  tax  if  certificate  filed 45 

Maker  of  note  given  in  payment  of  interest  held  responsible  for  tax  on G8 

May  appoint  withholding  and  paying  agent  to  act  for  it 38 

Note  given  in  payment  of  income,  maker  of  note  is (kS 

Not  to  withhold  against  nonresident  alien  or  foreign  organization  doing 

business  in  United  States,  when 4(i 

Not  to  withhold  when  receiving  certificate  of  collecting  agent  Uiat  tax 

withheld  l)y  same,  disposition  of  certificate 52 

Return  of  witliholding  by,  where  to  be  filed 38 

In  United  States  (or  its  withholding  agent)  charged  with  duty  of  with- 
holding from  coupons  or  registered  interest 39 

In  United  States,  duty  of,  before  payment  of  registered  interest. .......  41 

When  source  for  withholding  purposes 31 

"Deductible  net  addition  to  reserve": 

Insurance   company;   definition;   what  basis  of   computatinu  of;    wliat 

not  to  be  included  in J  t7il 

Deduction: 

Account  ])artnership  expense,  account  of  and  form  for  claiming 47 

Additions  and  betterments  constituting  increase  in  capital  in\estmeut, 

not lis 

Allowance  for  in  computing,  what,  when p.  5 

Amount  of,  to  ascertain  net  income p.  5 

At  source,  applies  to  normal  tax  only ]>.  12 

Bad  debts  of  corporation,  when 1 25 

Basis,  for  depletion  leased  oil  or  gas  territory 144 

Claims  for — 

Filed  with  collector,  witliholding  agent  tobe  furnished  slatemcnt  of . .  33c 

May  be  filed  with  withholding  agent,  when 31)0 

Not  allowed  unlei-s  made,  wlien p.  10 

Commission  to  salesmen  paid  in  stock  of  corporation  is,  wlien 117 

Compensati(-n,   officers   and   empl(,yoes  (f  State,   etc.,    exce])l,    when; 

judges  Federal  courts  now  in  office;  present  President  for  present  lorm. .  ]>.  (i 
Compensation  paid  employees  of  corporation  based  on  stoekholding,  not, 

why .' 119 

Corporation—  < 

Account  interest  paid  on  debt,  limited  to  what,  wlicn 81 

Materials  and  supplies  on  hand ,  what 123 

Depreciation,  amount,  how  treated - .  130 

Donations  for  charitable  purpose,  when 121 

Evidence  requisite  for  allowance  of 158 

For  interest  paid  at  different  rates,  rule  of  application 151 

Gifts  or  gratuities  to  employees,  not 120 

Pensions  and  damages  for  injuries  to  employees,  are 120 


IXDEX.  103 

Deduction — ConliuueJ. 

Cori)oratiou — Continued. 

Reserve    -  Article. 

For  insurance  its  own  property,  not 122 

To  meet  losses  insurance  companies,  not " i47c 

.Status  of  tax  for,  to  bank,  assessed  against  stockholder,  paid  by  bank. .  1.54 

And  exemptions  in  certain  cases p.  ]  1 

Debts  due  taxpayer,  ascertained  worthless  and  charged  off  in  year p.  5 

Depletion  of  mines,  regulation  of  rate  of,  limit  of 142 

Depreciation-  ■ 

Defined 1 29 

For  amortization,  allowed  when,  how 135 

How  determined 129 

Loss  by  shrinkage  in  property  value,  insurance  com})auy.  what  and 

when : I47d 

Reserve,  how,  disposition  excess  of 132 

Of  good  will  not  allowable 136 

Of  natural  deposits,  basis  and  limit  of 141 

Of  plant  (in  addition  to  deduction  for  depletion  of  mine),  vvliat,  and 

basis  of 143 

On  patent,  what,  how  determined 137 

Uneai-ned  increment,  not  value  for  purpose  of 14G 

Timberland — 

Limit  of,  excess  of,  is  income 140 

Removal  of  timber,  amount,  how  determined 139 

DiN'idends  on  stock,  what,  when p.  5 

Exemption  under  paragraph  C,  not  allowed  nonresident  alien p.  (i,  Art.  8 

Fali^e  statement  in  regard  to,  penalty p.  10 

From  gross  income — 

Mutual  marine  insurance  companies,  what 99 

Of  nonresident  alien,  what 8 

Tt)  ascertain  net  income,  for  normal  tax,  paragrai^h  B,  what 0 

From  net  income  to  a.scertain  taxable,  exemption,  paragraph  C  G 

From  premiums,  elc,  by  Avhom  made,  when p.  9 

P^ir  ascertaining  net  income,  what 3 

For  fire,  storm,  .shipwreck p.  5 

Foreign  corporation,  to  ascertain  net  inc<  une 157 

For  expense  of  business,  partnership  may  <'l:iini,  when  and  how 14 

For  restoring  property,  etc.,  none p.  5 

Increase  value  of  property,  none ]).  5 

Insurance  company — 

Claims  actually  paid  under  policy  contract,  are 147(; 

Losses,  what 147a 

Interest  on  obligations,  State  or  political  subdivision  of,  and  of  L^nited 

States  or  pos.scssio:i !>.  6 

Interest  paid  by — 

Bank,  etc.,  on  depo.sits,  etc.,  is 149 

Coqjoration — 

As  rental,  not  allowable 148 

Is,  what,  when 148 

On  ijidebtedncss  secured  by  <'ollaleral  subject  to  sale,  when,  why.  150 
On  mortgage  on  |)roperty  in  which  corporation  Iks  <'iiuity,  is 

and  amount  of .* H8 


104  INDEX. 

DKnucTiON- — Continued.  Article. 

Joiiit-.^tock  CDinpiuiy p]).  5,G 

Life  insurance  company — 

Frum  gross  iiiconio,  ai)])li('(l  s^urrendorod  values  and  coiLsideration 

for  supplement ary  Cdnlrafls 102 

i'riiin  gross  income,  what 1 00 

Loss — 

Duriiio;  year j) .  5 

Wliich  e(iq)oration  may  make,  defined 124 

l-'rom  removal  of  building  not  deductible,  why 127 

From  sale — 

Capital  a.«pets,  how  ascertained 128 

Cor])orat  ion  securities  below  pur,  how  tr(uUcd 1 35 

May  lie  claimed  account  tax  on  note  given  in  payment  of  income (iS 

«^nly,  claim  for,  may  be  filed  with  collector,  when 33c 

MutiKil  marine  insurance  company,  Avhat I47d 

Not  comi>ensated  by  insurance  or  otherwise ]>.  5 

Notice  to  be  filed  for p.  10 

Obsolescence  of  patents,  what ,  liow  determined 1 38 

Paid  for  }iew  buildings,  none ]■».  5 

Parayrupli  B — 

For  normal  tax  only,  7  and  8  included  for  purpose  of  additional  tax. .  6 

May  be  claimed  in  case  of  fixed,  determinable  annual  income* (iG 

Not  claimed  of  withholding  agent,  in  time,  only  remedy,  applica- 
tion for  refund 33c 

^^^len  claim  for  (Form  1008),  to  be  filed  with  withholding  agent  <.r 

collector 33b 

Permanent  improvements  or  betterments,  none ]).  5 

Property  own<'d,  business  carried  on  in  United   States,  ])erson  residing 

elsewhere,  what p.  0 

Repairs,  when 131 

Reserve  for  losses,  not 126 

Single  person,  amount  allowed p .  (i 

Tax  withheld ,  when ]i .  5 

Taxes  paid  by  corjioration — 

Are,  wh<m 152 

When  not 153 

To  ascertain  net  income  corjioration  engaged  in  more  than  one  class  of 

business 113 

Ueed.s  of  trust,  etc.: 

Corporation,  income  from,  subject,  to  withholding  at  source  regardless  of 

amount,  when p.  10.  Art.  37 

Dki.ixquext: 

Tax  becomes,  if  not  paid  by  Juue  30 25 

Depletion  : 

Deduction  for,  mines,  oil   or  gas  wells  crperated  on  royalty  basis,  not 

allowed  operating  coiT^oration 1-15 

Leased  oil  or  gas  territory,  basis  for  deduction  for 144 

Of  mines,  etc.,  regulation  of  rate  oi  deduction  for.  limit  of 142 

Depo.sit: 

Certificate  of,  interest  on,  part  of  gi-oss  income 4 

Interest  on,  not  subject  to  withholding;  must  be  included  in  personal 

return  whether  paid  or  not 07 

Interest  on,  part  of  gross  income 4 


I^DEX.  105 

DErRECIATION :  Article. 

Corporation,  defined 129 

Deductible,  amount  how  treated 130 

Deduction  for — 

Of  natural  deposits,  l^asis  and  limit  of 141 

Of  plant  (in  addition  to  deduction  for  depletion  of  mine),  what,  and 

basis  of 143 

On  patent,  wliat,  how  determined 137 

Diversion  reser^"e  for,  correction 133 

For  amortization,  allowed   when,  how 135 

Gross  value  at  the  mine,  defined G 

How  established  in  case  of  mines (> 

Loss  by  skvinkage  in  property  "\alue,  insurance  company,  v.hat.  ;)nd  when 

deductible 147b 

Of  good  will  not  allowable  deduction 13() 

Timberland — 

From  removal  timber,  amount,  how  determined 139 

Deduction  for,  limit  of,  excess  of  is  income 140 

Unearned  increment,  not  value  for  ba.sis  of  deduction  for 140 

Depreciatiox  reserve: 

Use  of,  disposition  excess  of 132 

Deputy  collector: 

Ascertain  persons  liable  to  tax  and  enumerate  objects,  .section  ;5172 p.  22 

Legality  of  returns  made  by,  section  3176 p.  24 

To  make  report,  false  or  fraudulent  return,  how,  section  3176 p.  24 

De.scext: 

Of  property — 

Income  from,  part  of  gi-oss  income 4 

Value  of,  not  income 4 

Devi.se  of  property: 

Income,  part  of  gro.<s  income:  value  of.  not  income 4 

Dispatch  op  business: 

In  collector's  ofhce .  - 195 

District  of  Columbia: 

Exemptions,  proviso p.  13 

Diversion: 

Depreciation  reserve,  correction 133 

Dividends: 

Compfnisation  paiil    employees  of   corporation  based  on   slo(  khohling 

are,  when 1 '  ■' 

Cooperative  dairies,  is  purchase  price  of  raw  material 92 

Of  corporations  subject  to  tax  not  subject  to  withholding !>.!).  Ar(..  32 

Deducted  from  net  income,  when 'i 

Pai't  of  gross  income "^ 

Stock  foreign  corporations,  subject  to  withholding  whcir. 1'.  II 

Stock  subject  to  tax— individual  owning,  how  treated 1'.  H 

Doctors: 

Fees  of,  indefinite  or  in-egular  not  subject  to  withholding :^2 

Donations: 

By  corporation  for  charitable  purpose,  deductible  \vh<-i! 121 

Domestic  building  and  loan  association: 

Definition,  what  necessary  to  exem]>t  from  tax ^'i 

Due  date: 

Return  on  Sunday  or  legal  holiday,  effect  of 1  -  '1 

Duties: 

Not  lax  and  not  de(luctit.l<'  but  ar<'  item  tA  cost b>) 


lOG  IJN-DEX. 

r,. 

Educational  corporations:  Article. 

Exempt,  when ]>.  l:> 

Emit-OYF-ks: 

State  (ir  ])olitical  subdivisioiia,  cuinjit'i^-alin'i  of  (iftlceiH  ami  (•iiii>l()yo<^s 

[Kuil  l)y.  not  part  of  gross  iucomo 5 

State  officers  or  employees,  compensation  pai-l  l)y  I'niicd  States  a  part 

of  gross  income 5 

Exuow.mext: 

Money  paid  for;  rciiniKHl.  nol  1o  ])<■  included  iu  gross  ineom.e 5 

EviDENCK  : 

Furnished  l)y  ageul  oi  authority  to  sij,ni  ownershi])  cerlificate  to  ]>v  re- 
tained lij-  verifying  agent 4.1 

Cnardian,  etc.,  served  with  notice  for  faiUirc  to  make  return,  may  fur- 

ni.«h,  what 18 

Oi  nonliability  to  payment  of  tax,  filed  with  withholding  ag<>nt,  may  l)e 

forwarded  to  collec-tor  in  lieu  of  tax p.  27 

Requisite  for  allowaiice  of  deduct i<ui  1>y  corporation 1-58 

Excise  axd  ixcojie: 

Tax,  corporation,  1!M.".  in  one  n-turn 191 

Excise  tax: 

Corporation,  for  wlu.t  ])erioil,  liow  coin]  mi  ted Kit) 

Executor: 

Is  fiduciary  when 70 

Make  return  of  income  of  deceased  within  taxable  year,  when  and  what .  17 
Exempt: 

From  tax — 

Corporations,  what 87 

Cooperative  dairies,  what 92 

Income  from  public  utility n:5 

Exemption: 

Allowed  in  computing  taxable  income  of  deceased  per.son.  when 17 

Amount  allowed  married  person p.     G 

Beneficiary  may  claim  from  fiduciary 74 

Boards  of  trade,  when p.  1^ 

And  deductions p.  11 

Cemetery  company,  depends  on  what 90 

Certificate  claiming  hy  corporat  ion  organized  in  United  States  f ornr  of  and 

how  executed 4-5 

Certificate  claiming,  what  must  show  and  how  executed 42 

Cliambers  of  commerce,  when p.  13 

Charilahle  associations,  Avhen p.  13 

Civic  leagues  or  organizations,  classes  of,  when p.  13 

Claimed"  by  fiduciary,  forms  1015  or  10 10 70 

Claimed  for — 

By  whom,  with  whom  and  when  to  bo  fded p.  10,  An  .  41 

How  to  be  filed p.  10 

May  be  filed  with  withholding  agent  when 33c 

Under  paragraph  C — ■ 

Allowed  to  person  iiermitted  (o  claim (iO 

Failure  to  claim,  effect  of 05 

Corporation  claiming — • 

To  establish  rights  to.  how 88 

Whose  taxable  status  in  doubt,  must  make  return  and  attach  state- 
ment showing  what 91 

District  of  Columbia,  provisions p.  13 


IlsDEX.  107 

Exemption- — Continued.  Article. 

Domestic  building  and  loan  associatiojis p.  13 

Educational  corporation,  when p.  i;j 

False  claim  or  statement  as  to,  penalty  lor 33a 

Fraternal  societies p.  13 

Husband  and  mfe^ 

Living  together,  citizen  or  resident  alien,  add  incomes  for  purpose 

of,  amount  of 10 

Separated  and  livuig  permanently  apart,  citizen  or  resident  alien, 

each  entitled  to  $3,000 10 

Individual — 

Deduction  of  from  net  income  to  ascertaiii  taxable 3 

Amount  of  for  1913 7 

Single,  or  married  but  not  living, with  husband  or  wife,  may  claim 

$3,000  each 9,  10 

]\Iay  be  claimed,  note  given  in  payment  of  income G8 

Mutual  cemetery  companies p.  13 

None  for  corporations 160 

Paragraph  (' — 

Not  allowed  nonresident  alien 8 

Not  claimed  of  withholding  agent  in  time,  only  remedy  application 

for  refund 33c 

To  be  filed  with  witltholdiug  agent  when 33 

Philippine  Islands p.  13 

Porto  Rico p.  13 

Public  utility p.  13 

Religious  associations  and  corporations p.  13 

Scientific  associations  when p.  13 

Status  of  person  clauning  determined  as  of  time  of  claim 10 

To  be  deducted  from  net  income  to  ascertain  taxable  under  paragraph  C. .  6 

Expen.se: 

Deductible,  pension  or  amounts  paid  employees  account  injuries  are..  120 

Geueral,  foreign  steamship  companies,  how  treated IIG 

Of  operation  and  maintenance  corporate  business,  what  include.-; 114 

Partnership  may  claim  deduction  for.  whon  and  how 11 

Extension: 

Time  for  fding  return,  when,  what,  how 23 

To  make  return,  not  exceed  what,  how  and  to  whom  made 173 

False  return. s: 

Additional  tax  imposed p.  9 

Or  fraudulent,  penalty j>.  21 

Fiduciary: 

Annual  return  by,  what  to  show  and  how  executed 73 

Definition  of 70 

Filing  notice  with  other  withholding  agent  (Form  1015),   nothing  to  be 

withheld 70 

Having  withheld  and  paid  tax  on  undistributed  annual  net  income  not 

to  again  withhold  when  distribution  made 75 

Income  of  beneficiary  not  distributed  during  the  year;  what  to  be  shown 

in  return ;  tax  to  be  withheld  and  paid  when 71 

May  be  appointed  agent  or  attorney  for  the  purpose  of  making  personal 

return  of  income  (Form  1040)  for  beneficiary 72 

Optional  claim  (Form  1015  or  1019) 70 

Regulations  as  to 70-75 


108  IXDEX. 

Fii>i.iiAK\     (.'oiitiiuied.  Article. 

Kuturii  hy  imist  be  nuidc  \\  lirii 71 

l{cnirii  hy  Id  iTichule  only  matter  within  scope  of  auilur.ity 72 

Ketiivn  of  not  to  include  iiicimic  on  wliicli  tax  ]);U(1 71 

lU^turn,  when  to  be  made 190 

To  make  annual  return  (Form  1041)  to  collector  of  district  when,  IdsIiow 

what 71 

Firm  : 

To  make  return,  how,  when,  section  3173 ])j).  22,  23 

Collecting  foreign  items,  license  re<iuired j>.  11 

Fiscal  yi:ar: 

Corjxiration — 

Duty  of  collc^clor  upon  receiving  notice  of 167 

IIow  established,  what  to  be  done 1G5 

Illustration  of  and  what  to  do 1G6 

Making  r(;tnru  on  basis  of  but  not  so  designating,  return  not  afccptcd 

and  must  be  ma.dc  for  calendiu'  year 171 

Notice  of  not  retroactive 1 G9 

No'tice  to  (H)llector  not  given  in  ])rescribe<l   lime,  calen«ku- year  to 

govern ]  08 

Not  jiroperly  established,  return  to  be  made  for  whiit  calendar  year  and 

tiled  when ■..-....  170 

Foreign: 

Corporation — 

Doing  ))usiness  in  Ignited  States- 
Provision  for ] ) .  15 

Return  by..  _ p.  19 

Particulars  of p.  18 

Where  filed p.  17 

Subject  to  lax  on  wlial 77 

Tax  on  net  income:  net  income  defined:  deductions  to  a.scertaiii-  . . .  157 
Item.s— 

Too  small  for  not al ion  on.  statement  of  facts  may  be  allaciied  to 58 

License  required  for  collection  of,  when  and  from  whoju 54 

Provisions  for  collection  of  tax  on  apply  wherever  said  items  payable, 

if  paid  in  United  States fil 

Income  paid  iu  United  States,  lirovisions  for  collection  of  tax  on 54-62 

Organization  doing  business  in  United  States  subject  to  tax  but  exempt 

from  withholding  upon  filing  certificate  claiming  (Fonn  1018) 46 

Partner.«hij)  owning  l)onds  of  corpoialions  organized  or  doing  business 

within  T  jiited  States,  not  subject  to  withholding  on  interest  of,  when. .  48 

PaynuMits  of  dividends,  etc.,  provisions  as  to  collection,  licen.se,  ixMialty.  p.  11 

.Steamship  company,  general  expense  of,  how  treated 116 

Fraudulent  heturn: 

Additional  tax  impcsed;  time  liniil  for  paying  after  notice p.  9 

G. 
Gains: 

For  taxable  purposes  arising  or  accruing  within  calendar  >eai',  part  of 

gross  income,  what 4 

Gas  or  oil  territory  leased: 

Corporation,  ba.sis  of  deduction  for  de))letion  of 144 

Gas  or  oil  wells  and  mines: 

Operated  on  royalty  basis,  deduction  for  depletion  of  dep(»sits  not  allowed 
operating  corporation 145 


INDEX.  109 

Gut:  Article. 

Of  property,  income  from  part  of  gross  income;  v;ilue  not  income 4 

To  employees  of  corporation  not  deductible 120 

GOVERNMEXTAL    FUNCTION: 

Income  accruing  to  State  frcun  exercise  of,  exempt 93 

Good  will: 

Corporation,  depreciation  of.  not  allowable  deduction 136 

Gratuities: 

To  employees  of  corporation  not  deduct  ibJe 120 

Gross  income: 
Corporation — 

Definition  of 9(5 

Engaged  in  more  than  one  class  business,  ascertained  in  ac(^ordan<e 

with  applicable  definition  each  class 112 

General  definition  of  gross  income 107 

Manufaduii'ncj  company,  definition  of 104 

Mercantile  company,  definition  of .  105 

Miscellaneous  corporation,  definition  of 106 

All  sources  to  be  specified p.  7 

Definitions 3,4 

Deductions  from — 

By  mutual  marine  insurance  companies,  what ' 99 

To  ascertain  net  income  for  normal  tax,  paragi"aph  T. (5 

Insurance  company,  definition  of 101 

Life  insurance  company — 

Definition 1(J1 

To  include  applied  surrender  values  a.nd  consideration  for  supple- 
mentary contracts 102 

Of  nonresident  alien,  what  constitutes S 

"What  to  be  excluded  in  computing 5 

Gross  value  at  the  mine: 

Defined 6 

Corporation,  definition 142 

Guardian: 

Is  fiduciary,  when 70 

Return  made  by,  when,  regulation ]).  7,  17 

H. 
Holiday: 

Due  date  of  return  falling  on,  effect  of 176 

Horticultural  organizations: 

Exempt p.  12 

Husband: 

Assumed  to  ]ia\e  sufficient  knowledge  of  income  of  wife  to  make  return 

for 10 

Having  net  income  other  than  Avife"s  income  from  separate  estate  so  that 
aggregate  income  hoih  more  than  §4,000,  Avife  return  attached  to  hus- 
band or  his  income  included  in  lior  return  for  j^urpose  of  $4,000  exemp- 
tion    10 

iShould  make  return  of  income  for  self  and  wife 10 

Husband  and  wife: 

Combined  net  income  of,  exceeds  $4,000,  return  of  must  be  made 10 

I>otli  joijitly  and  separately  liable  for  return  and  payment  of  tax JO 


110  INDEX. 

IIusuAM)  AND  wu'K --Ooutiiuied.                                   •  Aitide. 
Xot  living:  apart,  having  iscparate  estates,  income  of  both  may  Ix-  made 
on  one  return,  luu  return  must  show  income  of  each  separately  stated 

wii h  name  and  address  of  l)ot h 10 

Living  together,  citizen  or  resident  alien,  entitled  to  $4,000  exemption 

from  their  aggregate  net  income 10 

Separated  and  living  permanently  apart,  citizen  or  resident  alien,  each 

entiiled  to  $3,000  exemption  from  r.et  income 10 

Husband  oh  vvitk: 

Either  having  net  income  of  $3,000,  return  required,  a'ld  must  include 

incomes  of  Iioth JO 

Identity: 

Pecsons  i)rcsenting   c'ou])ou.'^   or  iuteresi    orders  .sliould    be   requiied   to 

establish 52 

1n(  oM  (•:: 

Addilionnl  tax  on,  referred  to  as  additional  tax ]->.  3 

Amount  from  which  withholding  to  be  had 32 

Banks,  interest  paid  on  deposits  by,  to  be  deducted j).  20 

Bonds  or  other  indebtedness p.  15 

But  not  value  of  property,  acquired  by  gift,  bequest,  devise  or  descent. . .  p.  5 
Compensation  of  officers  and  employees  of  State  or  jiolilical  snbdix'ision 

of,  paid  by  United  States,  part  of  gross  income 5 

Corporation — ■ 

Allowance  for  depreciation  ]>y  wear  and  tear p.  14 

Amount  allowed  for — 

Depreciation ]>.  18 

Taxes p.  20 

Bad  debts  collected  are 1 25 

How  ascertained j).  14 

From  sale  of  capital  assets,  how  dotormiinod 108 

Interest  paid  deductible p.  20 

Losses  sustained  diu'ing  the  year ]>.  18 

May  designate  fiscal  year p .  17 

Ordinary  expenses  of  operation  deductible p.  18 

Penalty  for  failure  to — 

Make  return  of ji.  21 

Pay  tax  on  after  June  30 ]>.  21 

To  give  notice  of  fiscal  year  adopted p.  1 7 

Deductions  from  gross,  mutual  marine  insurance  company,  what 99 

Derived  from  all  sources p.  13,  Art.  14 

Fixed  determinable  annual — 

From  what  derived 63 

Normal  tax  on  bonds,  etc..  when  deducted p.  10 

Withholding  from,  when til 

Foreign  corporation  doing  business  in   the   United   States,   letuni  of, 

particulars ]ip.  15,  17.  19 

Foreign,  paid  in  United  Stales,  pro\dsions  for  collection  of  tax  op 54-G2 

For  taxable  purposes — is  income  for  calendar  year 4 

For  1913,  how  computed ]>.  17 

From  all  sources  part  of  gro.=s  income 4 

From  bonds,  mortgages,  deeds  of  trust,  and  .similai  obligations  of  corpora- 
tions, etc.,  subject  to  withholding  at  source  regardless  of  amount 37 

From  capital  invested  in  the  United  States ]>.  18 

From  certain  professions  tiot  subject  to  withholdiiig  at  source 32 


INDEX.  Ill 

Income — Continiied.  Article. 
From  public  utility  or  governiiienlal  I'lmction  accrnin;?;  to  State,  clc, 

exempt  from  tax 9:5 

From  what,  obligations  not  subject  to  tax  and  certificate  of  oiviiersliip 

not  required .S7 

Gross,  defined 3,4 

Corporation — 

Engaged  in  more  than  one  class  of  business,  ascertained   in 

accordance  with  ai^plicable  definition  for  each  cla.'^s 1 12 

Definition  of 9fi 

General  definition 107 

Insurance  company,  definition  of  gross  income 97,  10 L 

Life  insurance  company,  to  include  applied  surrender  values  and 

consideration  for  supplementiiry  contracts 10- 

Maniifactnring  company,  definition tOt 

Mercantile  corporation,  definition 10') 

Miscellaneous  corporation,  definition 106 

Mutual  fire  insurance  company,  definition 108 

What  to  be  included  in  computing 5 

Husband  and  wife,  wluit - 10 

Individual,  not  subject  to  withholding  when 32 

Insurance  company,  to  be  separately  stated ]>.  18 

Insurance  reserve,  how  treated p.  17 

Interest — 

Accruing  during  year p.  10 

0  a  deposits p  ■  15 

On  (obligations  of  State,  etc S 

Joint  stock  companies,  how  ascertained  and  stated pp.  14,  15.  18 

Life  insurance  companies,  what  included,  deductions pp.  14, 19,  Art.  100 

Mutual  fire  insurance  companies pp.  14, 18,  19 

^^■hat  taxable 98 

■  Mutual  marine  insurance  companies pp.  18, 19 

Net- 
Defined  3 

Of  corporatiDU  engaged  in  nn>re  than  one  class  of  business,  how 

ascertained 113 

Deductions  allowed  for  ascertaining p.  5 

Shall  include  what pp.  3,  4,  13, 14,  15,  16,  17,  20 

Not  subject  to  withholding  at  source,  to  be  covered  in  personal 

return 32 

Note  given  in  payment  of;  maker  of  note  is  debtor  and  source; 

required  to  Vv'ithhold,  except,  when 68 

Of  corporations,  verified  how 1 83 

Returns  of,  filed,  are  public  records;  inspection  of,  who  may  and  for 

what  purpose P •  -^ 

Penalty  for  divulging  information  on  or  exhibiting  returns,  section 

3167 P-  22 

Tax  paid  at  source,  deducted  in  ascertaining  taxable 3 

On,  from  coupon  or  registered  interest  to  be  deducted  and  withheld, 

except  to  extent  exemption  claimed -i^ 

Taxable- 
Defined  "^ 

Persons  subject  to 1 

For  normal  tax,  what,  how  ascertained P-  3,  Art.  7 


112  INDEX. 

Income — Continued.  AiMiclc. 

Subject  to  additional  tax j).  3 

\\liat  not  liable  to  withholding  at  source ;J2 

Withheld,  what,  when,  by  wimm p.  9 

IxniviDJAi.: 

'Wlio  may  claim  exfiri]iiiuii  jiaiagraph  (' !),  10 

Duty  of,  collection  interest  coupons  originating  in  United  States :!9 

IIasl)an<l  and  wife  living  together,  citizen  or  resident  alien.  <'xc:n])ti(in 

$4,000 10 

Income  accruing  to,  from  contract  with  State,  etc.,  prior  to  ])assage  of 

act    f(n-    construclion,    operation,    or    main(<'nance,    ])uldir     utility, 

taxable 93 

Income  less  than  $20,000  required  to  make  rettn-n,  except  when 19 

Income  of,  liable  to  withholding  at  source  on  and  after  November  I .  I  !i  1 3.  29 

Liable  for  income  tax  on  share  of  net  earnings  of  partnership 47 

Married  and  not  living  with  husband  or  v\-ife,  amount  ex<>ni])tion 9 

Normal  tax,  what 1 

Partnership  profits  included  in  return  of  and  tax  itaid.  not  rc])orted  as 

income  again 14 

Residing  in  foreign  couiitry,  where  to  lile  return 15 

Rettn-n — 

For  (^alendar  vear 4 

Required  of  guardian,  etc.,  notice  of  faihn-e  to  make,  served  when . .  18 

"\\Tien  to  be  made 190 

Share  of  earnings,  ])artnershi]i.  property  of,  subject  to  tax  chargealde  to 

individual 94 

Share  of  partiier.slii]>  profits  to  be  included  in  i)ersonal  return 13 

Single,  allowable  exemption  for .• 9 

Status  for  claiming  exemption,  determined  as  of  time  of  claim 10 

Information: 

From  retTn'n.«  to  officers  of  State,  when,  what,  how 1 79 

I  \  SA  K  E : 

\\"ho  make  claim  I'nr  deducl  inns  Inr 33b 

In.spf,ctiox: 

Of  returns,  how 1 78 

Insurance  company: 

"Deductible  net  addition  to  reserve";  definition;  what  Iiasis  of  e(jm- 

putation  of;  what  not  to  be  included  in 147d 

Deduction,  claims  actually  paid  under  policy  contract 147c 

Depreciation   loss  by  shrinkage   in   property  Aalue,    what  and   when 

deductible 147b 

Gross  income,  definition 97,  101 

Income  to  be  stated  separately ]).  18 

Losses — 

Actually  sustained pp.  14, 19 

Deduction  for  what 147a 

Making  false  return,  penalty p.  12 

Mutual  marine,  deduct  what -• .  147d 

Neglecting  to  make  return,  penalty ]).  12 

Net  addition  to  reserve ]>•  18 

Net  income,  source,  time  of  accrual,  return  of pp.  1-'.  1 1,  20 

Notice  of  assessments  to V-  20 

Penalty  for  failure  to  pay  tax p.  21 

Refusing  to  make  re.turn,  penalty p.  12 


INDEX.  113 

Insuraxck    Companv — Coutiuued.  Article. 

Ixescrve — 

Definition 147d 

Fund,  how  treated p.  17 

To  meet  losses,  how  treated 147c 

Returns  of,  when  availa])lc p.  21 

Salvage,  how  treated  in  return  ol" 147c 

Special  excise  tax,  how  computed,  time,  what p.  26 

To  make  return  of  others,  when p.  9 

Insurance: 
Life- 
Paid  to  beneficiaries  not  to  be  included  in  gross  income,  when 5 

Payment  credited  to  insurance  not  to  be  included  in  gross  income, 

when 5 

Received  by  insured  not  to  be  included  in  gross  income,  when 5 

Interest: 

Coupon  or  registered,  originating  or  payable  in  the  United  States,  who  to 

withhold 39 

I'^rom  what  obligation  not  subject  to  tax  and  certificates  of  ownership  not 

required 37 

How  treated 63 

On  deposits — 

Part  of  gross  income 4 

Subject  to  withholding;  must  be  included  iu  personal  return  whether 

paid  or  not 67 

( )n  obligations  of  State  or  political  subdivision  of,  United  States  or  pos- 
sessions, not  part  of  gross  income 5 

Paid  as  rental  by  corporation,  how  treated 148 

Paid  by  bank,  etc.,  on  deposits,  etc.,  allowable  deduction 149 

Paid  by  corporation — 

Deduction  of  what,  when 148 

On  indebtedness  secured  by  collateral  subject  to  sale,  deductible 

when,  why 150 

At  different  rates,  rule  for  application  of  deduction  of 151 

On  mortgage  on  property  in  v/hich  corporation  has  equity  or  is  pur- 
chasing, how  treated 148 

Part  of  gross  income 4 

Payment  of ,  to  beneficiaries  by  insurance  companies,  part  of  gross  income .  5 

Registered,  certificate  claiming  exemption  to  be  filed  at  least  five  days 

before  due-date  of  interest 44 

Registered,  duty  of  debtor  before  payment  of 41 

Inventors: 

Earnings  of,  indefinite  or  irregidar  not  subject  to  witliliolding 32 

Inventory: 

Corporation,  purpose  and  use  of,  kinds  of I'jl^ 

Joint  stock  company: 

Assessment  against,  payable PP-  ' >  20 

Deductions  allowable  to ^ 

Income — 

How  ascertained PP-  1"^'  ^'^ 

To  be  separately  stated '•  -        P-  1^ 

l^osses  actually  sustained P-  ^ '^ 

Neglecting  to  make  return,  penalty P-  ' 

24785—14 8 


o 


114  INDEX. 

« 

Joint  stock  company — Continued.  Article. 

Net  income  from  all  sources ]>.  J4 

Net  income  taxai)li'  for  preceding  calendar  year p.  12 

Notice  to  be  given  of  assessments !> .  20 

Penalty  for  failure — 

To  make  return ]>.  20 

To  pay  tax p.  21 

Return — 

False,  ])enalt y  for p.  12 

For  others  made  by p.  9 

Net  income  to  be  shown  on p.  20 

Refusing  to  make,  penalty ]>.  12 

When  available ]>.  21 

\\  Ju'u  tu  make p.  17 

Special  excise  tax  and  how  computed 1^.  26 

Judges: 

United  States  courts,  salaries  exempt,  what 5 

Jurisdiction  : 

Of  courts p.  25 

L. 
Labor  organizations: 

Exempt p.  12 

Last  due  date: 

Defined 175 

Laws: 

Relating  to  assessment,  remission,  collection,  refunding p.  25 

Lawyers: 

Fees,  indefinite  or  irregular,  not  subject  to  v.'ithholding 32 

Lessees  or  mortgagors: 

Make  return  for  others,  when 1>.  9 

Liability: 

To  tax  of  a  taxable  person  not  to  be  released 27 

License: 

Bond  may  be  required  on  form  furnished 5P 

Failure  to  obtain,  penalty  for 55 

For  branch,  to  be  made  through  principal  ofhce 57 

Form  of  application  for,  to  be  made  to  collector  of  district 55 

Form  of;  to  be  is.sued  by  collector,  good  until  revoked 55 

Required  for  collection  of  interest  or  other  foreign  items,  when,   b\- 

whom,  Avhere  ol^tained p.  II,  Art.  54 

Licensee: 

First,  recei\'ing  foreign  item  for  collection  to  v.'ithhold  and  be  respon- 
sible for  tax  and  to  note  fact  of  withholding  on  such  item,  effect  of .  . .  58 
For  collection  of  foreign  items — 

Disposition  of  certificates  accompanying,  by 61 

To  keep  record  showing  what 62 

To  report  to  collector  (Form  1043),  what,  when 50 

Life  insurance: 

Proceeds  of  policies,  when  to  be  excluded  from  gross  income i>.  5,  Art .  5 

Life  insurance  company: 

Applied  suiTcnder  values  and  consideration   for  supplementary  con- 
tracts both  to  be  added  and  deducted  in  retinn 102 

Deductions  from  gross  income,  what p.  19,  Art .  100 

Gross  income,  definition pp.  14,  19,  Art.  101 

Supplementary  statement  attached  to  return  of,  showing  what 103 


IIS^DEX.  115 

Limitation,  statute  of:  Article. 

For  income  tax  purposes,  three  years 177 

Lodge  system: 

Coi-poration  0]>prating  under,  defined 80 

Loss : 

Corporation — • 

Deductible,  defined ' 124 

From  sale  capital  assets,  how  ascertained 128 

From  sale  securities  below  par,  how  treated 1,35 

Insurance  company,  deduction  for,  what 147a 

Removal  of  building  not  deductible,  why 127 

Reserve  for,  not  deductil^le J 2*5 

M. 

Maker: 

Of  note  given  in  payment  oi  interest  held  responsible  for  normal  tax Cti 

Manufacturi\'g  compaxy: 

Gross  income,  definition 104 

]VL\NUFACTURERS  I 

Returns  of,  accessible  how,  })enalty,  sec.  olu7 p.  22 

Marixe  insurance  company: 

Deductions  by ]>.  !  8 

IVLiTE rials  and  supplies  ox  hand: 

Deduction  by  corporation  on  account  of,  what 123 

Mercantile  corporation: 

Gross  income,  definition 105 

Mine  : 

Gross  value  at — 

Defined (j 

Corporation,  definition 142 

Depreciation p.  14 

Operated  on  royaltj^  basis,  corporation,  deduction  fur  depletion  of  de- 
posits not  allowed  operating  corporation I4.5 

Minor: 

Who  make  claim  for  deductions  for S3b 

Miscellaneous  corporation : 

Gross  income  of,  definition 106 

Monthly  list  return: 

Form  of,  what  to  contain,  to  be  filed  in  duplicate 50 

Of  coupon  or  registered  interest  orders  received  with  ownership  certifi- 
cates, form  of  and  vv'hat  to  show 53 

Of  licensee  for  collection  of  foreign  item,  form  of,  what  to  show,  v/ith 

whom  filed,  when 59 

Summary  of,  when  to  be  filed  and  what  to  show 50 

Totals  only  fo  bo  carried  into  annual  return 51 

Mortoaoes: 

Interest  on,  when  subject  to  witliiiokUng p.  10 

Not  payable  in  United  States,  when  subject  to  withholding j*.  1 1. 

Paid  by  corporation  which  has  equity,  how  treated 148 

Of  corporation,  income  from,  subject  to  witljhrtlding,  regardless  of  ainonnf .  37 

Mutual  companies : 

To  make  return  of  income;  definition  of  nri  income 80 


t 
116  I^s^DEX. 

MlTlAI.  FIRE  INSL"UANLK  CtJ-MPAXY:  Article. 

Gross  income  of,  deliiiition 98 

Premium  deposits  returnod,  what p.  ig 

Rotiirn  of 1  .p.  I  1,  ] (),  18, 19 

Sup])lementiuy  statement  atlathcd  to  return  of,  showing  wlial 103 

Taxable  income,  what 98 

Mutual  marine  ixsurakce  company: 

Dednclions.  what p.  ID.  Arts.  99, 147d 

Gros.s  income pp.  14, 18 

Supplementary  statement  attached  to  return  of.  showino;  what 103 

N. 
Names: 

Arrangement  of,  in  list  liy  collect  or 188 

Natural  deposits: 

Deduction  for  depreciation  of,  basis  and  limit  of Mi 

Net  income: 

Defined 3 

Corporation — 

Engaged  in  more  than  one  class  of  bu.siness,  how  ascertained 113 

For  1913,  how  ascertained 159 

From  sale  of  capital  assets,  how  determined 109 

Should  be  what 158, 183 

Foreign  corporation,  defined 157 

Mutual  companies,  defined 80 

Normal  tax 1 

Note: 

Given  in  payment  of  income;  maker  is  debtor  or  soun'e  and  must  \\  illihold 
on  entire  amount  of  note  if  in  excess  $3,000,  except  allowance  exemp- 
tion or  deduction  claimed 68 

Given  in  payment  of  interest;  failure  of  purchaser  to  make  allowance  or 

deduction  for  tax,  only  remedy  is  against  vendor,  how 68 

Notice: 

Answer  of  guardian,  etc. ,  may  show  what 18 

Assessment,  advance  preparation  of,  by  collector 1 98 

riaiming  deduction  account  partnership  expen.se,  by  whom  filed.  Avhat 

and  how 47 

Collector  to  give  Avithholding  agent,  when  tax  withheld  is  adjusted  in 

assessment 33c 

Form  1015  filed  by  fiduciary  with  other  withholding  agent,  nothing  with- 
held   70 

Of  assessment;  failure  to  pay  tax;  make  return ;  form  of;  time 197 

Of  claim  for  exemption  by  foreign  partnership,  when,  wh^it,  how 48 

Of  failure  fiduciary  to  file  return,  served 71 

Of  failure  to  make  return,  when  to  be  served  on  guardian,  etc 18 

To  delinquent,  failure  to  file  return  in  t ime 196 

To  taxpayer,  of  amount  for  which  li:il:)l(»  ns  on  or  before  June  1 25 

O. 
Oatii  or  affirmation: 

Required  in  verifying  retiu-ns 22 

Obligations  : 

Interest  on,  of  State  or  political  subdivisioii;  United  States  or  posses- 
sions not  part  of  grcss  income 5 


INDEX.  117 

ObLIOATIOKS   of  CORPOKATIONS,    etc.:  Article. 

Similar  to  bonds,  mortgages,  and  deeds  of  triLst.  income  from,  subject  to 

withholding,  regardless  of  amount 37 

Obsolescexoe: 

Of  patents,  deduction  for,  Avhal,  how  deiermined ]38 

Officers: 

Of  State  or  jwlitical  subdivision  of,  compensation — 

Of  not  part  of  gross  income 5 

Paid  by  United  States  is  part  of  gross  income 5 

Regulations  designed  for  enforcing  compliance  with  law p.  27 

Of  the  United  States  making  returns  for  others 9 

Oil  or  oas  territory  leased  : 

Basis  of  deduction  for  depletion  of 144 

Oil  or  gas  wells  axd  mines: 

Operated  on  royalty  basis,  deduction  fur  depletion  vi  deposits  not  alloAved 

operating  coii^oration 145 

Omitted  tax: 

May  be  assessed  and  with  ponali y ,  when 184 

Org  A  \  iz  ATio  X  s : 

CiWc,  exemptions p.  13 

P. 

Paiu-up  capital  stock: 

Definition  of 95 

Partnership: 

■   As  such  not  subject  to  tax  and  not  required  to  make  return  except  on 

request  Commissioner  or  Secretary 12 

Foreign — 

Composed  of  nonresident  aliens,  resident  aliens,  and    citizens   of 

United  States,  either  or  both,  requisites  of  ownership  certificate  for.  49 

Owning  bonds,  etc.,  of  corporations,  etc.,  organized  or  doing  business 
in  the  United  States  not  subject  to  withh(dding   on   interest  of, 

provided  exemption  claimed  (Form  1016) 48 

Individual  share  of  profits  of,  to  be  inchided  in  personal  return 11 

Limited,  is  corporation  and  subject  to  corporation  tax SG 

Liable  only  in  individual  capacity ]).  8 

May  claim  deduction  for  expenses  of  business,  Avhen  and  how 14 

Members  of,  liable  in  individual    capacity  for  tax  on  their   respective 

shares  of  earnings  of,  whether  distributed  or  not p.  4,  Art.  94 

Profits  of — 

Once  returned  and  tax  paid,  not  again  reported  as  income 14 

To  be  included  l)y  individuals  entitled  to,  in  their  ])ersonal  return. .  13 

Return  of,  when  to  be  made,  section  3173 p.  22 

Shall  forward  correct  statement  of  profits  and  names p.  8 

Share  of  profit  to  partners p.  8 

To  file  with  withholding  agent  notice  claimijig  deduction  for  expense  of, 

what  and  how 47 

To  make  list  or  retuni,  how  and  when,  section  3173 , !>■  -2,  Art.  23 

When  n-qiiirod  (o  make  ref  uni  nnisf  make  complete  and  correct 12 

Patents: 

Deduction  for — 

Depreciation,  what,  and  how  determined 137 

Obsolesceiice,  what,  how  dolormined 138 


118  INDEX. 

Taymext:  Article. 

To  officer  audK-rizcd  U>  rect'ive j).  9 

Penalty: 

And  interctst  for  nonpaymcnl  when  due  and  for  10  days  after  notice,  when .  p.  9 

l)<'lin(iiient  lax — • 

Amount  of,  and  hoAV  determined,  n.l  assessed  strainst  estates,  in- 
sane, deceased,  or  insolvent  persc^ns 25 

Penalty: 

For  ilivulging— 

Information  on  return,  what 1 81 

Unlawfully,  information  on  return,  flue  or  imprisonment,  or  lK>th, 

with  costs ^CA 

Failure  to  make  retm'U  in  prescribed  time  or  for  fak^e  or  fraudulent, 

fine  or  imprisonment,  or  both , p.  2 1 ,  A  ri .  1  (i4 

Failure  to  pay  tax,  5  per  cent  to  tax  plus  1  per  cent  per  mojith 1G4 

Fahe  claim  or  statement  to  secure  exemption p.  10,  Art .  r>3a 

False  or  fraudulent  return  \\\\  h  intent  to  evade  or  defeat  Uix,  what 2Cy 

False  or  fraudulent  return,  100  per  cent  to  tax p.  21,  Art.  \CA 

False  statement  in  regard  to  deduction P-  10,  Art.  33b 

Making  false  return p.  12 

Neglect  or  refustil  to  make  retm'u p.  12.  Art.  1C4 

Person  or  officer  of  corporation  required  to  make  return,  making  false  or 

fraudulent,  with  intent  to  defeat  or  evade  a.ssessment KH 

Refusal  or  neglect  to  make  return,  liable  person,  corporation,  etc.  p.  12.  An.  2(5 
Refusal  to  make  or  for  false  return,  to  lie  assessed  and  collected,  what..  21 

Return  made  and  properly  mailed  in  time  but  not  received  in  time. 

none '71 

Pensions: 

Or  payments  on  account  of  injuries  to  employees  of   corporations,  de- 
ductible expense 1 20 

Peksox: 

Whose  income  is  not  subject  to  withholding  at  K)urce,  make   personal 

return 32 

Persons,  firms,  etc.: 

r'ollecting  foreign  items,  license  required p.  1 1 

Whatever  capacity  acting,  withholding  agent,  when,  what p|).  7,  it 

"Withholding  none  prior  to  November  1 ,  1913 ]>.  8 

Philippine  Islands: 

Exemptions p.  13.  Art s.  25,  20 

Plant: 

Corporation,  de<1uction  for  depreciation  (iu  addition  to  the  deduction 

for  depletion  of  mine),  what  and  basis  of 113 

Political  sibdivtsion  of  State: 

Interest  on  obligations  of,  not  part  of  gross  income 5 

Officers  and  employees  of,  compensation  not  jnul  of  gros-s  income 5 

Porto  Rico: 

Exemptions  and  provisions p.  13,  Arts.  25,  26 

Possessions: 

Of  United  States,  interest  on  obligations  of.  not  part  of  gross  income. ...  5 

Premiums: 

Deductions  from,  )jy  whom,  when p.  9 

President  of  the  United  States: 

Salary  of,  exempt,  what 5 


IXDEX.  1 19 

rROcEDCRE:  Article. 

In  case  of  refusal  or  neglect,  liable  individual  to  make  retism  (>r  for 
false  return  made Note  to  Art .  21 

Professional: 

Persons  whose  income  indefiniie  or  irregular,  not  subject  t)  withholding.  32 

Profit  or  loss: 

Cbrporation,  on  sale  of  capital  assets,  how  determined 110 

Profits: 

For  taxable  purposes  of  those  arising  or  accruing  within  calendar  year. .  4 

From  any  source  j^art  of  gross  income 4 

Partnersliip  once  return  and  tax  paid,  not  rejxirted  as  income 14 

Partnersliijj,  individual  entitled  to  include  in  Ida  personal  rc-turu 13 

Share  of,  in  partnership  to  be  included  in  return  of  individual i  I 

Property: 

Received  by  gift,  bequest,  deidse,  descent,  income  from  but  not  value, 
l^art  of  gross  income 1 

Public  records: 

Returns  are,  inspection  of  or  copies,  how 1 78 

Public  utility: 

Income  from  accruing  to  State,  etc.,  exempt  from  tax ();'> 

Purchaser: 

Of  note  given  in  payment  of  interest,  failure  to  make  allowance  or  deduc- 
tion of  tax  in  purchase  or  discount  only  remedy  is  against  A'endor (iS 

R. 

Rate  : 

Deduction  for  depletion  of  mhies,  etc.,  regulation  and  limit  of 142 

Receipts: 

Separate  to  be  issued,  when 25 

Record:  , 

To  be  kept  by- 
Collecting  agent,  what 40 

Licensee  for  collection  of  foreign  items,  what  to  shov.'- 62 

Refuxd: 

Failure  to  make  claim  for  exemption  or  deductions  with  withholding 

agent  in  time ;  only  remedy  is  by  application  for 33c 

Registered  interest: 

Certificate  claiming  exemption  from  tax  on,  lobe  filed  at  least  five  days 

before  due  date  of  interest 44 

Regulations: 

Designed  to  assist  taxpayer  and  officer  in  complying  with  the  law ]>.  27 

Subjects  covered  and  arrangement  of P-  -7 

Removal  op  buildings: 

Not  deductible  loss,  corporal  ion ,  why J  27 

Rent: 

Corporation,  cost  of  buildings  on  leased  ground  deduclil)k',  when J 15 

How  treated 03 

Interest  paid  by  corporation  as,  how  treated 148 

Part  of  gross  income 4 

Repairs: 

Deduction,  when 131 


120 


l^'DEX. 


Reserve:  Article. 

Assessment  insurance  company,  delinition 147d 

J'lir  depreciation — 

Diversion  of,  correction 133 

Use  of,  disposition  of  excess  of 132 

For  insurance  of  curjiorate  lu'ojierty  not  deductible 122 

l-"iir  lii.sses  Udl  d(  (luclil)li' 120 

J-'or  taxes  of  corporation  not  deductible 15G 

Insurance  companij,  deductible  net  addition  to.  delinition;  what  basis 

computation:  what  not  to  be  included  in ]47d 

To  meet  loss,  insurance  company,  how  treated 1 17c 

Re.siuknt  alien: 

C'ertilicates  of  t.wner.ship  of  Ijuuds,  when  and  liow   io  be  u.->ed  and   lo 

specify  what 42 

Income  of,  from  coupon  or  registered  interest,  subject  to  withholding 

except  to  extent  exemption  claimed 44 

Hex  u  HNS : 

Administrators  to  make  for  heirs,  when 9 

Agents  to  make  for  others 9 

Annual  individual  and  monthly  list  to  be  forwarded  to  Commissioner, 

how 24 

Annual  list(Forml013),  to  show  what,  and  to  be  filed  on  or  before  March  1.  50 
Annxial,  of  coupon  or  registered  interest  orders  not  accompanied  by 
certificates  of  ownershi]?;  form  of,  and  what  to  show;  lo  be  filed  v/hen ; 

to  show  totals  only  on  monthly  return 53 

Annual,  of  debtors  or  withholding  agents  to  show  totals  only  on  monthly 

list 51 

Annual,  fiduciary  to  collector  of  district  when;  show  what 71 

Annmil,  of  Avithholding  agent,  form  for,  to  be  accompanied  by  what, 

when  to  be  filed - 35 

Annual,  of  withholding  agent  (Form  1042),  what  to  show  and  when  to  be 

filed 69 

Approval  of  Secretary 7 

Blanks  for,  furnished  corporations  by  collector 163 

By  persons  of  lawful  age 7 

Certified  copies  of,  when,  Avhy,  delivered  to  whom 180 

ConserA-ators  to  make  for  others 9 

(~'orporation — 

Every,  iio(  specifically  exempt,  to  make SO 

Fiduciaries,  withholding  agents,  when  to  be  made 190 

Going  into  liquidation  to  make  final;  filed  when  and  where 85 

Not  receiving  blank  for,  should  make  application  for,  to  whom,  when.  163 

One  only  for  1913 160 

Organized  during  year,  to  make 84 

To  make  complete  or  nor  accepted 163 

When  income  paid  l)y  lessee  direct  to  stockholders,  must  neverthe- 
less make 80 

Copy  of,  unlawful  to  exhibit,  section  3167 1>.  22 

Divulging — 

Information  from,  penally 181 

Unlawfully,  information  on,  penalty 164 

Due  date  on  Simday  or  legal  holiday,  effect  of 176 

Duplicate,  when,  of  whom  required,  disposition  of 193 


l^DEX.  121 

Returns — Continuea. 

Duty  of  collector —  Article. 

On  failure  to  find  person  at  home,  section  31 73 1>.  23 

In  forwarding  and  investigation  of 192 

Employees  to  make  for  others p.  9 

Evidence  by  which  to  verify,  what 1  S3 

Executors  to  make  for  others p.  9 

Extension  of  lime — 

For  filing,  when,  what,  how 23 

To  make,  not  to  exceed  what,  how,  to  whom  made '. . . .  173 

Faihu'e  of  corporation  to  receive  blank  for,  not  excused  from  making 

return  or  penalties  for  failure !  (;3 

Failure — ■ 

Of  fiduciary  to  file,  notice  of,  served 71 

To  make  by  guardian,  agent,  or  other  person  acting  in  trust  capacity, 

notice  to,  served  on 18 

To  make  in  prescribed  time,  of  a  false  or  fraudulent,  penalty 1(54 

To  make — ■ 

Notice  of,  fonn  and  tim.e  to  serve 197 

Legal  provisions  as  to p.  23 

False  or  fraudulent — 

Penalty p.  12,  Art.  I(i4 

Duty  of  collector  in  matter  of 1 92 

With  intent  to  defeat  or  evade  tax,  penalty 2G 

Fiduciary — 

Having  income  not  distributed ;  what  to  be  shown ;  tax  to  be  A\-itliheld 

and  paid  when 24 

Must  be  made  when 71 

Not  to  include  income  on  which  tax  paid 71 

To  include  only  matter  Vidthin  scoj^e  of  authority 72 

What  to  show,  and  how  executed 73 

For  1913,  must  be  on  new  form  and  not  on  excise  fonn  heretofore  used..  172 
Foreign  corporation   having  more  than  one  brancli  office  in   United 

States  to  designate  principal  office  and  person  to  niiake  reiurn 83 

Form  of  for  corporation  prescribed J  63 

For  persons  incapacitated,  by  whom  made 1>.  10 

For  persons  absent  from  United  States,  by  whom  made ]>.  1 0 

Fraudulent — ■ 

Duty  of  collector I'-  '■^•'> 

Extra  tax  because  of P-  9 

Time  limitation  for  paying  after  notice V-  ^ 

Husband  and  wife,  net  income  both  exceeds  $4,000,  of  comljincd  in- 
come, required "* 

Husband  and  vvife  not  li\dng  apart,  separate  income  from  separate  estate 
may  be  made  on  one;  separately  stated  and  with  names  and  addresses 

of  both I*' 

Husband  should  make  for  liimself  and  wiie- ' " 

Husband  or  wife,  either  having  net  income  $3,000  or  over,  required,  and 

mu.st  include  income  of  both "* 

1  ndivddual— 

To  be  made  when ""^ 

For  calendar  year ' 

Made  by  collector  when -'' 


122  IXDEX. 

Retukn.s  -  Colli  iiuicd. 

Individual — Continued.  Article. 

Not  required  to  make,  when  made  by  otli.er  [or  liini,  wlien 19 

To  include  share  of  partnership  profits  in 13 

Information  ov  copies  from,  to  oflleei-s  of  Stale,  wlien,  wliat,  how;  orig- 
inal not  removed  execpt 179 

Last  due  date  defined 175 

Leased  corporations  make  their  own 82 

•     Legality  of,  made  by  collector  of  deputy,  sec.  317G p.  24 

Lessee  corporation  assuming  debts  of  lessor  to  iu(  ludc  in  lessee  return 

all  receij^ts  of  lessor SI 

Lessee  corpoiation  not  to  include  in  its  own  statement  of  capital  stock, 

that  of  lessor;  nor  in  its  own  statement  of  indebtedness,  that  of  lessor 

except  when  said  indebtedness  is  assumed  by  lessee 82 

Life  insurance  company — 

Applied  surrender  values  and  coiiiiideraliou  fur  supplemcnlary  con- 
tracts both  added  and  deducted 102 

Supplementary  statement  attached  to  return  of,  showing  what 103 

Made  and  properly  mailed  in  time,  no  ])enal(y  if  not  received  in  time.  .  174 

Made  by  guardian  or  authorized  agent,  when 17 

Made  on  basis  of  fiscal  year  but  not  so  designated,  not  accepted,  and  nuisl 

be  made  for  calendar  year 171 

Made  to  collector p.  9 

Montiily,  by  withholding  agent,  when  to  be  filed;  with  whom,  what  to 

accompany 35 

Monthly  list  and  annual,  by  licensee  for  collection  of  foreign  items,  what, 

to  whom,  when 59 

Monthly  list,  form  of,  what  to  contain,  to  be  filed  in  duplicate 50 

Monthly  list  of  ccmpon  or  interest  ordere  not  accompanied  by  certificates 

of  ownership,  form  of,  and  what  to  show 53 

Must  be  made,  when,  section  3173 p.  22 

Mutual  companies  to  make;  definition  not  income 80 

Mutual  fire  insurance  companies,  supplementary  statement  attached  to. 

slif)V.'ing  what 1 03 

Mutual  marine  insurance  companies,  supplementary  statement  attached 

to,  showing  what 103 

Neglect  or  refusal  of  liable  person,  corporation,  etc. ,  to  make,  penalty 26 

Neglect  or  refusal  to  make,  50  per  cent  additional  tax 164 

Neglect  to  make,  penalty p.  12 

Nonresident  alien,  agent  or  rei^resentative  to  make  fi^r,  when,  what  to  be 

included  in 8 

Not  required,  income  not  exceeding  §3,000 p.  8 

Not  filed  in  time,  notice  sent  to  delinquent 196 

Officers  and  employees  of  the  United  Sta4es.  having  control  salaries, 

rents,  etc. ,  to  make  when p.  9 

Of  income — 

\Mien  required,  where  filed 15 

persons  deceased  within  taxable  year,  made  by  executor  or  admini.><- 

trator 17 

On  basis  ot  calendar  year  or  fiscal  year,  time  of  assessment  and  payment 

of  tax 177 

One  deduction  only  of  exemption p.  8 

One  to  cover  both  sjiecial  excise  and  income  tax  for  1913  for  corporat  ion .  .  p.  26 

Open  to  inspection,  when p.  21 


INDEX.  123 

Reiurxs — Continued.  Article. 
Partnership  profits  included  by  individual  and  tax  paid,  nut  again  re- 
ported as  income 14 

Partnership,  requisite  of 12 

Penalty — • 

Against  corpomtion  for  failure  to  make 163 

For  failure  to  make  at  time  specified p.  2 1 

For  refusal  to  make j) .  12 

Personal,  Form  1040;  fiduciary  may  be  appointed  agent  or  attorney  to 

make  for  benefician,- 72 

Personal  not  required,  when 8 

Person  or  officer  of  corporation  required  to  m.ake,  making  false  or  fraudu- 
lent with  intent  to  defeat  or  evade;  penalty 104 

Person  residing  in  foreign  country,  provision  for 7 

Public  records,  inspection  or  copies,  how ?■  21,  Art.  178 

Receivers  to  make  for  others 9 

Refusal  or  neglect  of  liable  individual,  duty  of  collector p.  23,  Art.  21 

Refusal  to  make,  extra  tax p.  9 

Requisite  of  bookkeeping  for  verifying 182 

State  officer  may  have  access  to p .  21 

To  be  filed,  when. p.  7 

To  be  made  on  Form  1040  for  individuals 10 

To  be  made  to  collector pp.  7,  9 

To  include — 

Personal  income  not  subject  to  withholding 32 

Share  of  i:)rofits  in  partnership  whether  divided  or  not 11 

To  be  verified,  how,  before  whom p.  7,  22 

Trustees  to  make  for  others p.  9 

Understatement  of  incom.e,  cause  to  be  shown  why  amount  not  in- 
creased  ^. ■ p.  8 

Undervaluation  or  understatement p.  23 

Unlawful  to  exhibit  or  divulge  information  from,  section  3107 p.  22 

Wiie  having  income  of  $3,000  from  separate  estate  managed  by  herself 

may  make  her  own 10 

"VMiat  must  be  shown  on 16 

When  to  be  made;  where  filed,  section  3173 ])p.  21,  22 

Withholding  agent,  what  disposition  of;  should  not  be  filed  until  expira- 
tion of  time  allowed  for  filing  claims  for  exemption  or  deductions 33c 

Revised  Statutes: 

Amended   sections  of,   jnoxiding  duties  and   penalties,   sections  3167, 

3172,  31 73 pp.  22,  23,  24 

Royalties: 

IIow  treated 03 

Royalty  basls: 

Klines,  oil  or  gas  wells,  operated  on,  deductioji  for  depletion  of  deposits 

not  allcnvpd  operating  corporation 145 

S. 
Salaries: 

How  treated 1 ,  03 

Sale  of  capital  a.'.set.s: 
Corporation—- 

Income  from,  how  doteiniincd 108, 109 

Loss  from,  h(»v,-  ascertained 128 

Profit  or  loss  on 110 


124  INDEX. 

Sai.ksmkn:  Aiticlo. 

Commission  in,  paid  in  slu<-k,  ck'dutiibl'--  (.'xponsr-  when 117 

Salvage: 

How  treated  in  return  of  insiu'ance  company 1 470 

Scientific  associatiox: 

Exemptions p.  i;{ 

Securities: 

Income  from;  sale  of,  })elow  par;  loss 1, 135 

Shhixkace: 

In  hook  Aalue  capital  assets,  how  treated 134 

In  property  value  insurance  company,  depreciation  loss  by,  whal  and 

when  dedn<(i1)l(! 1  171) 

Size: 

I'^oreign  items  too  small  for  notation  on,  statement  may  he  alhuh<  <1  to. .  58 

Society: 

Operating  under  the  ''lodge  system,"  defined;  exemptions ]>.  1:5,  art.  89 

Source: 

Defined 31 

Example  of  wltere  and  where  not  witldiolding  at ■   32 

Fiduciary  is,  when 70 

Note  given  in  payment  vi  income,  maker  of  note  is 68 

Persons,  firms,  etc.,  acting  as,  designated  ''debtors"  or  ■wilhliolding 

agents  " 31 

Tax  withheld  at ,  to  he  paid  to  collector 34 

"Withholding  at,  applies  only  to  normal  tax  imposed  on  individuals 29 

Who  required  to  act  as;  liahle  for  tax  withheld 30 

Si'KCiAL  tax: 

See  sections  3173,  3176 ]ip.  22-26 

State: 

Information  from  return,  'when,  how : 179 

Officers  and  employees, 'paid  hy  United  States;    compensation  part  of 

gross  income 5 

Political  subdivision  of,   compensation  of  ofticers  and  employees  not 
part  of  gross  income ;  interest  on  obligations  of,  not  part  of  gross  income.  5 

State  or  United  States: 

Construction;  exemptions,  distinction  as  to,  for  certain  income  from  State, 
etc l.p.13,21 

Status  : 

For  claiming  exemption  )a'  individuals 10 

Statute  of  limitation: 

For  income-tax  purposes,  three  years 177 

Stock: 

Paid-up  capital ,  definitii  ai 95 

Substitute  certificates 40 

Summary  op  monthly  list  return 50 

Summons,  section  3173 p.  24 

Sunday  or  legal  holiday 176 

Supple.mentary  statement  attached  to  return 103 

Supplies  o.v  hand 123 

T. 
Tax: 

Additional,  on  individuals  only,  rates  and  cla.«ses 2 

Amounts  added  as  penalty,  section  3170 ]).  24 

Assessment  and  collection 25 

From  withholding  agent 36 


INDEX.  125 

Tax — Coutiiiued. 

Assessment —  Artiiic. 

Against  income  withheld  at  source 38 

Of,  against  withholding  agent  deferred 189 

Claim  for  abatement  of 33c 

Cooperative  dairies  exemjit 92 

Corporations — 

Exempt 87 

On  entire  net  income 185 

Organized  in  United  States,  all  (with  certain  exceptions)  subject  to.  76 

Delinquent  if  not  paid  by  June  30 25 

I)e])uty  collectors,  duties,  section  3172 '  p.  22 

Domestic  building  and  loan  association,  what  necessary  to  exempt 87 

"Duties"  are  not  but  item  of  cost 155 

Evidence  of  nonliability,  received  by  withholding  agent,  disposition  of.  p.  27 

Evidence  of  payment  of,  by  coii'>oration  for  deduction  purposes 158 

Excise  on  corporation Arts.  100, 191 

Extra p.  9 

Failure  lo  pay 164, 177, 197 

Fixed  determinable  annual  income,  subject  lo  withholding 65, 66 

Fraternal  societies,  exempt p.  13 

Individual — 

Net  income  over  $^>,000  annually,  liable  to P-  12,  Art.  9 

Income  from  jjublic  utility  taxable  when 93 

Income  of  corporations  organized  elsewhere  than  in  the  United  States, 

liability 79 

Normal — 

Computation  of Art.  1,  7 

Deductions  in  cdnnectidn  with pp.  10-12,  Art.  41 

Agricultural,  horticultural,  and  labor  organizations,  certain  mutual 

savings  banks,  exempt p .  12 

Not  to  be  withheld  against  partnership  profits 47 

N<u  to  be  withh(^kl  on  bank  deposits 67 

Omitted,  procedure  upon  discovery  vi 184 

Once  withheld,  subsequent  withholding  agent,  exempt  <>n  filing  certifi- 
cate (Form  1006) 34 

Oji  excess  of  income  over  exemption 10 

Paid  by  coqioratidu,  when  not  deductible 153 

Partnership  limited  is  corjioration  and  subject  to  c(irp(irati<;n  lax 86 

Penally  on  delinquent 25 

On  income — 

From  bunds,  etc. ,  corporal  ions,  etc 37 

Paid  by  note 68 

On  interest  on  bonds  owned  by  corporations  organized  in  United  States.  45 

On  net  income  of  foreign  corporation;  definition;  deduction 157 

On  net  income  of  cf)rporation— 

Compulation  of 159 

Distributable  to  owners 79 

Receipts  to  be  given  by  collector p.  25 

Returns  of,  to  be  made,  section  3173 P-  22 

Special  excise X).  20 

Taxable  person  not  to  be  relieved  from  liability 27 

To  be  paid 177 


126  IMDEX. 

Tax — Coutiuucd.  Article. 

To  be  wilhh  'Ul -11,  G4 

Withhold— 

At  source,  to  be  paid  lo 30 

By  fir^st  licensee,  fad  {>i  withhoUUni^  noted 58 

Collector  to  adjust  in  ^issessment  against  willihokling  jigent 33c 

l''roin  what (j4,  75 

To  be  paid  \n  ((.Ueetor 33c,  34 

Taxahle  IX com k: 

Deliuition;  liability 3,  7 

Tax  DTK 187 

Taxks: 

Paid  Ijy  corporation  couslilutc  deduciiou 152 

Reserve  for,  by  corporation  not  deductible 156 

Taxpayeu: 

Piep;ulalions  designed  to  assist p.  27 

Tax  .statements 19;t 

Tax  year  1913 7 

Trustee: 

As  fiduciary 70 

Duties  of 1>.  'J 

Teacher: 

Public  school 5 

Timbeuland: 

Deduction  for  depreciation — 

Account  removal  of  timber 139 

Limit  of,  excess  of,  is  income 1 40 

Time: 

Extension  of,  for  making  and  filing  return 2;!,  173 

F. 

Unearned  increment: 

Not  value  for  depreciation  purposes 146 

"UxiTEt)  States"'  oh  "State": 

Construction p.  21 

Interest  upon  obligations  of 5 

V. 
Valie: 

Book,  capital  assets,  shrinkage  in 134 

Gross  at  the  mine,  definition 6,  142 

Of  property,  acquired  by  gift,  etc 4,5 

Shrinkage  in  property,  deductible 147b 

Unearned  increment,  not  as  basis  of  deduction  fur  depreciation 140 

W. 

Wages 4,  63 

Wife: 

Having  income  of  $3,000  from  separate  estate  managed  by  herself  may 

make  returu  of  her  own  iiu-ome 10 

Wife  and  Hu.snAXD: 

Combined  net  income  of  exceeds  §4,000,  retuin  reciuired,  both  jointly 

and  separately  liable  for  return  and  tax 10 

Wife  or  nr.sBAXD: 

Either  having  inrome  $3,000  or  over,  return  rerpiired  and  must  include 
incomes  of  bot  h 10 


iiS:DEx.                                 .  127 

Withholdixg:  Article. 

A t  sourte 30 

Example  of  where  and  vfhore  liot 32 

On  and  after  November  1,  191:5 29 

By  first  liscensee;  notation  by;  rei>ponsibility  of 58 

From  what G4 

Withholding  ACiEXT: 
Annual  return  by — 

By,  when,  to  show  what 50,  51 

Of  (Form  1042),  when  to  be  filed,  to  Ite  accompanied  by  what 35,  C9 

Not  to  be  filed  until 33c 

Assessment  of  tax  against,  deferred  until 189 

Claim  for  exemption  and  dediictions  filed  with  (par.  B  and  C).  p.  10,  Arts.  :"!3ac 

Definition  of,  as  source 31 

Disposition  of  returns  of 1 93 

Duty  in  matter  of  certificates  of  ownership ]).  9,  Art.  43 

Duty  of,  in  matter  of  claims  for  deduction  (par.  B) 33c 

Duty  of,  in  case  of  foreign  partnership 48 

E\'idence  of  nonliability  to  tax  filed  with,  disposition  of ]>.  27 

How  to  treat  substitute  certificate  of  collecting  agent  and  certificates  of 

owners  not  subject  to  having  tax  withheld 51 

May  file  claim  for  abatement  of  tax 33c 

Monthly  return  by,  when  to  be  made,  with  whom  filed,  to  be  accom- 
panied by  what 35 

Notice  filed  ^vith,  claim  for  deduction,  account  partnership  expense 47 

Not  to  -withhold  against  nonresident  alien  or  foreign  organization  doing 

business  in  United  States,  when 40 

Return  of,  when  to  be  made 190 

Eelieved  from  necessity  of  withholding,  when p.  27 

To  file  monthly  list  return,  form  of,  and  what  to  contain 50 

To  forrt^ard  to  collector  tax  withheld,  when 33c 

To  furnish  statement  of  claim  for  deductions  filed  -with  collector 33c 

To  pay  to  collector  tax  withheld 64 

To  withhold  from,  what,  amount  of 32,  65 

When  claim  for  deductions,  paragraph  B,  to  be  filed  with,  duty  of 331),  CG 

When  so  authorized,  may  file  return  of  withholding  in  district  of  his 

location 38 

Who  to  l>e,  in  cases  cited G4 

WlTHHfJLDIXa   AXD   PAYIXG   AG  EXT: 

Of  debtor  in  United  States,  charged  wiili  duty  of  withhohling,  v.'hcn 39 

WiTx  esses: 

Jurisdiction  for  coiujielling  attendance p.  25 

Y. 
Year: 

•ar 4 


For  taxable  purjw.ses  for  individual,  is  calendar  yea! 
(See  fiscal  year  for  corporation.) 


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